Crude Oil Prices Hit Resistance, Next Move May Be Lower
Crude oil talking points:
- Now, they look likely to slip back.
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Oil prices lifted by Trump’s Iran decision
The prices of both global benchmark Brent crude oil and the US contract have continued to move higher following US President Donald Trump’s decision to withdraw from the international nuclear pact with Iran. However, a pause now seems likely and there is a risk that prices will fall back.
Brent has now established itself above the psychologically important $75/barrel mark and has hit resistance at a trendline joining the highs reached since mid-April. That makes a pullback to the $75 level from just below $77 currently more likely.
Brent Crude Oil Price Chart, Daily Timeframe (Year to Date)
Similarly, the price of US crude has overcome the $70/barrel mark but has stalled and seems likely to retrace at least some of its recent gains after reaching its highest level since December 2014. While a reduction in oil exports from Iran can now be expected, it is quite likely that any shortfall will be made up by increased US shale output.
US Crude Oil Price Chart, Daily Timeframe (Year to Date)
Notably, there has been very little response to news from the American Petroleum Institute that US crude inventories fell much further than expected in the week to May 4 – data that might have been expected to boost prices further.
Moreover, there are hopes that European efforts to salvage the nuclear pact could reduce the impact of the US withdrawal from it and that a wider conflict in the Middle East can be avoided.
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--- Written by Martin Essex, Analyst and Editor
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.