Brent crude – Rallies on Iranian waiver expiry

Oil continues higher as sanctions waiver expiry nears

Oil prices are creeping higher again on Tuesday, although they have lost a little of the spark that saw them steamroll through yet another key resistance area at the start of the week. There isn’t much doubt about the trigger for the latest rally, with Trump’s decision not to extend waivers on imports of Iranian oil beyond May unsurprisingly providing further upward pressure – although I’m sure he’ll just blame OPEC.

The rally took gains in WTI to more than 50%, since it bottomed out back in December. That’s not a bad return and makes the OPEC+ meeting in June all the more interesting, with an extension to December now a doubt, especially with Russian support already a doubt.

Reports that Saudi Arabia and UAE will make up the shortfall from the sudden decline in Iranian output is doing little to stop the moves, given that both are currently cutting production to comply with the agreement.

Brent Crude Daily Chart

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From a technical perspective, momentum hasn’t really backed even the latest move which suggests the rally may be running out of steam. This would be perfectly understandable at this point. We’ve run into resistance around $75 today, at which point the stochastic is making a lower high, as is the MACD histogram. While this negative divergence isn’t a bearish signal in itself, it could be construed as a red flag.

If this continues to push higher, through highlighted resistance above, the $79-80 becomes notable potential resistance. $78 is a recent peak as well but prior to this, support and resistance was frequently found in the $79-80 range.

If we see a corrective move, $72.50-73.50 could offer the first test, with roughly $67.75-69.40 below here being interesting. Not only was that a recent strong area of resistance, the cluster of moving averages also makes it interesting.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.