Crude oil prices gapped higher overnight as the market reopened after the weekend. Traders responded to news of further military tit-for-tat engagements between the US and Iran, with the biggest concern being Iran’s attacks on US military bases in Kuwait, Bahrain and even Jordan. Last week, President Trump told his NATO allies at a summit in Turkey that, as far as he was concerned, the ceasefire was over.
Since then, both sides have got busy, and Iran has once again attacked shipping attempting to pass through the Strait of Hormuz. Tehran has insisted that the vessels under fire were using ‘unapproved routes.’ Yet other countries have said that such routes don’t exist. There’s now a stand-off, with Iran claiming that it controls the Strait and has blocked it, while President Trump insists that it remains open for shipping.
The bottom line is that there are fewer ships passing through the Strait than there were last week or the week before that, although it has been suggested that ships in the region have turned off their transponders.
Technically, oil prices have rebounded off very oversold levels, according to their respective daily MACDs. The MACDs have now turned up sharply but have yet to approach their neutral levels. The rally so far could be enough to reset the MACDs. But there’s a possibility that prices need to rally further to exhaust fresh buying.
Source: TN Trader
One way or another, traders would like to hear more evidence to suggest that the Strait of Hormuz is safe to traverse. But the past four months have shown that the market has been very successful in keeping a lid on oil prices by avoiding the Strait and using overland pipelines, increasing production and releasing stored inventories.
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