Peace Hopes Clash With Fresh Supply and Geopolitical Risks
WTI and Brent crude oil futures face another week of uncertainty, with some traders pressing prices lower on hopes of a U.S.-Iran peace deal rather than specific signs of concrete progress. Meanwhile, President Trump said he was highly unlikely to order fresh attacks on Iran as long as negotiations continue to show progress.
Traders are talking about another possible supply glut after JPMorgan said last week that recovering Middle Eastern flows, rising production elsewhere and weak demand have pushed global supply above consumption. Its analysts estimate a surplus of 1.1 million barrels per day in September, widening to 1.4 million bpd in October.
Both sides reported shipping incidents in or near the Strait of Hormuz. However, the market is not getting a clear signal on whether U.S. attacks will resume. Iran said it would respond to any U.S. aggression by striking U.S. and Israeli targets.
An administrative Saudi Aramco building in Riyadh was damaged by falling debris after an attempted Houthi attack on Sunday. Russia’s Kirishi oil refinery was set on fire after an overnight Ukrainian drone attack. These events, along with uncertainty over whether Trump will resume attacks on Iran, stand in contrast to a market selling off as if a concrete peace deal is in the works. JPMorgan’s projected supply surplus is adding to the bearish narrative.
Weekly December WTI Crude Oil Futures Technical Analysis
December WTI crude oil futures are still in an uptrend according to the weekly swing chart despite last week’s sharp sell-off. A trade through $86.00 will change the main trend to down. Overtaking $104.99 will signal a resumption of the uptrend.
Also providing both support and trend direction is the 52-week moving average at $74.39.
The long-term range is $55.63 to $104.99. Its retracement zone support is $80.31 to $74.49. Inside this zone is the 52-week moving average. It forms a potential support cluster with the long-term 61.8% level at $74.49.
The intermediate range is $66.98 to $104.99. Its retracement zone support is $85.99 to $81.50. The swing bottom at $86.00 forms a potential support cluster with the intermediate 50% level at $85.99.
Combining both retracement zones produces a potentially major support area at $81.50 to $80.31.
The short-term range is $104.99 to $86.65. Its 50% level is $95.82.
Brent Oil Price Forecast
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See all Brent Oil forecastsWeekly January Brent Crude Oil Futures Technical Analysis
January Brent crude oil futures are still in an uptrend according to the weekly swing chart. A trade through $114.29 will signal a resumption of the uptrend. Taking out $70.96 will change the main trend to down.
Brent crude is being supported by a long series of retracement levels from $97.81 to $80.24. The most important are the retracement level support clusters at $94.63 to $93.92 and $87.51 to $86.74. The 61.8% level at $80.24 forms a support cluster with the 52-week moving average at $79.28.
The new minor range is $114.29 to $93.22. Its 50% level or pivot is $103.76. This level is controlling the near-term direction.
What to Watch
December WTI Crude Oil Futures
Despite the uptrend on the weekly swing chart, my bias is to the downside because the market is trading on the weak side of the short-term pivot at $95.82. Trader reaction to this indicator should set the tone this week. As of last week’s close at $90.34, this tone is bearish.
A sustained move under $95.82 will indicate that sellers have taken control. This could trigger a move through the main bottom at $86.00, changing the main trend to down. Follow-through pressure could create the momentum needed to drive the market into the key $81.50 to $80.31 area. If this fails, the selling is likely to extend into the next major support cluster formed by the 52-week moving average at $74.39 and the long-term 61.8% level at $74.49.
Traders should note that changing the main trend to down at $86.00 will put the market in a position to test 50% to 61.8% retracement zones at $85.99 to $81.50 and $80.31 to $74.49. To some traders, these areas represent value so bearish traders may be vulnerable to aggressive bottom-picking and short-covering. My outlook will shift if support forms inside either of these areas, or if buyers overcome the pivot at $95.82.
From the high at $104.99, December WTI futures have plunged over $18.00, while maintaining its uptrend. What the market could be asking traders is, do you want to sell weakness into potentially major support or wait for a retracement of the break? It could also be asking do you want to buy this break? I think it has to retrace to $95.82 before we’ll know whether sellers or buyers are in control.
January Brent Crude Oil Futures
I’m leaning bearish because of the sustained move under the pivot at $103.76. The trade could open up to the downside under last week’s low at $93.22, but the layers of retracement level support indicate it may not be a smooth ride lower. Every level along the way could attract dip buyers as long as the market remains on the strong side of the 52-week moving average at $79.28.
Essentially, I think the longer-term trend is up and will remain bullish as long as the 52-week moving average holds, but momentum has shifted to the downside.
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