What's next for the global oil market? Understanding the effects of US-IRAN conflict on key pairs

Published date: 26/05/2019
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It has been a tough week for global equities and the oil market. Traders should now focus on creating possibles sceneries for the US-CHINA trade war and US sanctions on Iran. A complete understanding of the economic impacts can be an opportunity to profit no matter the outcome.

At the moment of writing, WTI is approaching an interest level. Building part on the analysis on trend following, it is clear that a bounce is possible around the 3.50-3.60 level. If bulls are not convinced of the 3.50 monthly support, then we will see a significant break, with prices heading to even lower levels.

Brent and West Texas futures are taking heavy losses since seven weeks now. US sanctions to Iran are getting warmer, with analysts expecting the conflict to scale even further in the Middle East. If this scenario happens, then USD/CAD and WTI will get more volatile weeks.

OPEC is also under a lot of pressure, as it is experiencing the consequences of being neutral. Investors will be closely following further announcements to see if a new agreement will be put on the table, driving prices up once more if so.

Price stability must be the most important objective of OPEC right now. Countries such as Russia won't be able to support the gap in global production for much longer, while Saudi Arabia already decided not to boost their production, at least not until 2020.  About the US, they do not seem to care about global supply figures, as they are relying on their own production.

China and Turkey have agreed to skip the sanctions imposed, as prices they are getting from Iran are too good to end the deal. The insurgency from China its a sign to the US to show who’s dominate the Eastern geopolitical panorama. Traders evaluating USD/TRY and USD/CNY need to proceed with caution, as further sanctions can affect both pairs negatively.

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