Ceasefire Talks and US Strikes – Mind the Crude Oil Gap Tomorrow!
Crude Oil was enjoying some consistent upside momentum in January but this week everything turned upside-down and most gains have been erased. But, we can see a huge gap on either side at the Tokyo open tonight, as ceasefire talks in the Middle East and possible US trikes can throw the market off.
Ceasefire in the Middle East Weighing Oil Prices Down
Crude Oil was on a slippery slope during Q4 of 2023 on weaker global and Chinese economy, but it turned bullish at the start of January, gaining approximately $10 from the bottom until Monday when the price in WTI crude peaked at $79.30. However, the rally came to a halt as buyers ran into the 100 SMA (green) on the daily chart, and despite increased tensions in the Middle East, the price has reversed and lost around $7 since Monday’s highs.
Besides the difficulties in China, US WTI and UK Brent Oil futures fell this week on hawkish FED, which means interest rates will remain higher for longer. Although a major drag on the prices were reports of a potential ceasefire in the Middle East as well. Qatar sounded ‘optimistic’ about the deal which will likely ease geopolitical tension in the region and relax the situation in the Red Sea. However, there are no guarantees that the situation will be completely safe in the Red Sea water passage, the attacks on commercial ships are likely to decline. So, we are keeping an eye on the news to see if we will see a bearish gap at the Asian open.
US Strike Would Send Geopolitical Tensions and Oil Price Higher
However, a bullish event for crude Oil prices would the increase of tensions in the Middle East. On Friday, the US launched significant airstrikes on up to 100 targets in different sites in Iraq and Syria, which were far more serious than earlier airstrikes in recent weeks, which had mostly targeted weapons storage or training centers.
This could be marking the beginning of a series of larger-scale US assaults, which would increase the tensions dramatically nd send crude Oil surging higher. The price action on Friday didn’t show panic, but if tensions escalate then we might see a large bullish gap tomorrow.
US WTI Crude Oil Live Chart
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