Oil prices continue to fall today as investors digest and assess the latest developments on the geopolitical issues and what it really means for the oil prices. It is widely anticipated among investors and traders that we are not going to see any further escalation in tensions among Iran and Israel as the Supreme Leader in Iran has floated the idea of re-opening the conversation on Iran’s nuclear deal. Basically, speculators believe that if this is the narrative among lawmakers in Iran, then one can completely forget about Iran attacking Israil, as the US has openly said that it would defend Israil with all its mighty power if Iran attacked Israil. Now, the question arises: where will oil prices go in the absence of geopolitical tensions, which many traders and oil cartel producers relied on as their only hope for prices to surpass the 100 dollar mark?
Traders have turned their focus on oil supply, and they are paying attention to every single factor that doesn’t have even significant value, such as oil supply from Libya. The current narrative is that there is a risk that we might see a loss of 1.2 million barrels per day in Libyan oil production. In terms of prices, buyers show no interest in crude or Brent oil, as the path of least resistance for oil prices continues to remain skewed towards the downside. Despite the threat of conflict escalation on Israil-Gaza, speculators continue to hold out hope for better oil price action. There is a belief that the political conflict between competing governments might trigger a widespread shutdown among Libyan oilfield producers, potentially resulting in a daily shortage of 1.2 million barrels. However, we believe this narrative is overly optimistic.
Oil traders will be closely monitoring the upcoming crude oil inventory data, which is expected later. They anticipate a positive print that could potentially halt the current selloff, given the recent downward trend since morning. The forecast for the crude inventory data is for -2.7 million, while the previous reading was at -4.6 million. So if a number shows better than the forecast, we may see a little pause in the selloff as the prices for Crude and Brent are very much on track to close the week in the negative territory.
Speaking from the technical perspective, we believe that the immediate support would be near the $70 price mark for crude oil, and bears are very much in control of the price action as crude oil continues to trade below the 50-day SMA on the daily time frame. As long as this trend remains in place, the bulls are likely to struggle to gain momentum. As for the resistance, it is near the 77 price level.
