Any upsides to crude oil price action appears to have been contained as threats between the US and Iran have so far remained just that: threats. Brent crude oil is currently trading at intraday lows of 69.78, after hitting resistance around the 70.85 – 71.04 price area.
So far, the expected spike in crude oil price has not happened, mostly because there have been no significant incidents to cause supply disruptions. However, this threat still looms as the war of words on both sides continue following the US drone strike that killed Iranian General Qasem Soleimani and the attacks on the US embassy in Baghdad, Iraq. Adding to the mix are reports that have emerged from Reuters in the last hour that a statement that was to have been made by the UN Security Council condemning the attacks on the US embassy in Iraq was blocked by Russia and China.
Last week’s price surge in Brent crude occurred in the context of the break from the ascending channel’s return line. However, this breakout has met resistance at 71.04, site of previous crude oil price highs in January and March 2018, as well as role-reversed price lows of August 2018 and April 2019. The pullback that has occurred has retreated all the way back to the channel’s broken return line, which is expected to act as a support in an S-R flip (role reversal).
A bounce from the channel’s upper border is expected to create a situation where Brent crude could retest the recent high at 71.04, with further potential upside targets at 73.25 (previous highs of 6 Nov 2018 and 16 May 2019), as well as 75.55 (April 24 2019 high).
On the flip side, if price is able to sink back into the channel, then it may meet horizontal support at 66.98 (previous high of Feb 2019 as well as June-July 2019 double top). This is expected to be the support before the channel’s trendline border comes into view.