Fundamental analytics

Brent: Conflict in the Strait of Hormuz provides some support to oil prices


Oil market has closed trading session on Friday with moderate growth, but weekly outcome showed negative results on the back of growing concerns regarding forming of oversupply. Investors expected, that hurricane “Barry” will produce bigger impact on production and refining in the Gulf of Mexico, but after all it didn’t cause major damage. Also market was negative about substantial dissents between USA and China, that virtually put on hold the process of further development of trade talks.

Recovery of the quotes on Friday took place on the back of messages about another escalation of the situation in the Strait of Hormuz. Iran has blocked British oil tanker and investors are again concerned about escalation of the situation in the Strait, that may lead to significant disruptions in energy supply from the Middle East. As of now it’s the only support factor for the market, therefore all investors’ attention is absorbed by these events. If the conflict shortly gets some expansion oil prices can move up once again. If Iran, USA and other involved participants will start negotiations, oil market will get under solid pressure, since all the rest factors point to forming of high risks of imbalance in favor of oversupply. 

On the chart an upward wave develops from the 61.00 level. Locally the signals of potential reversal of price movement are absent at the moment, therefore in short-term we can expect further growth of the quotes in direction of the 64.60 and 66.60 levels.

Resistance levels: 64.60, 66.60, 67.30;

Support levels: 62.80, 61.00, 59.50.

Main scenario: Growth towards 64.60.

Alternative scenario: Break of support at 62.80 and decline towards 61.00.

On the chart bullish signals prevail locally, therefore for intraday trading we give preference to long-positions, that should be sought in the vicinity of 62.80 level.

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