Crude on Watch

Oil prices are looking more muted today following a strong push higher over the end of last week. An uptick in global geopolitical tensions saw crude prices spiking higher late last week as traders reacted to the prospect of a rising supply disruption risks. An escalation in the conflict between Russia and Ukraine, US military action in Venezuela and threats against Greenland and now the rising prospect of conflict between the US and Iran are casting heavy clouds over the near-term global outlook. As a result, traders sense increased risks that global supply could suffer heavy disruptions if any of these issues boil over (particularly US/Iran).

US/Iran Conflict Risks

Given that Iran is the fourth largest producer in OPEC, any disruption to the more than 3 million barrels-per-day output could have significant impact on the wider marketplace. As such, traders are watching incoming news flow carefully with any sign of progress towards a US strike on Iran likely to see oil prices spike higher near-term. Trump is due to briefed tomorrow on options for addressing the situation in Iran, believed to range from sanctions through to a full-scale military attack. News flow on the back of that briefing will no doubt be the key driver for oil flows this week. If Iranian state violence against protestors continues, a military strike will look increasingly likely, paving the way for higher crude prices.

Technical Views

Crude

The spike higher in oil has seen the market breaking out above the bear channel highs. While above that structure, and with momentum studies bullish, focus is on a continuation higher with 61.39 the next resistance to watch. Only a break back below 57.57 will alleviate near-term bull risks, putting focus back on support at the 55 level.