Oil’s Battle: Can Momentum Overcome Long-Term Weakness?
Oil prices surged past critical technical levels last week as escalating Middle East tensions raised fears of significant supply disruptions. As bullish momentum builds in response to geopolitical risks, let’s explore the key levels to watch, where short-term gains could face resistance from lingering long-term weakness.
Geopolitical Tensions Fuel Oil's Rally
Last week, oil logged its biggest weekly gain in nearly two years, surging more than 8% as tensions in the Middle East intensified. The rally was sparked by growing fears of supply disruptions after Israel considered striking Iran’s oil infrastructure in retaliation for missile attacks. With Iran exporting 1.7 million barrels per day, any attack on its facilities could trigger a significant cut to global supply.
The risk of a broader conflict extends beyond Iran. Should Tehran retaliate or block the Strait of Hormuz—through which nearly 20% of the world’s oil flows—oil shipments from key producers like Saudi Arabia, the UAE, and Iraq could grind to a halt. Such a move would have devastating effects on global supply chains, with experts warning that oil prices could surge past $150 per barrel, leading to severe economic fallout. The mere speculation of these events has already fuelled the sharp rise in prices.
Technical Levels Align for Oil's Next Test
From a technical standpoint, oil’s rally has been impressive but faces a key test just ahead. Having broken through its 50-day moving average and the descending trendline, prices now sit just below the 200-day moving average—a major resistance zone that’s aligned with both the April and July swing highs. Additionally, the VWAP anchored to the April highs further bolsters this area as a point of confluence.
The RSI is elevated but still not in overbought territory, which leaves room for more upside if prices can clear the 200-day moving average. However, a failure to break above this resistance zone could signal a temporary top, especially if geopolitical tensions cool.
Brent Crude Daily Candle Chart
Past performance is not a reliable indicator of future results
Hourly Candle Chart – A Battle of the Timeframes
Drilling down to the detail of the hourly candle chart reveals a battle between short-term momentum and long-term weakness. Prices have already responded to the daily VWAP anchored to the April highs, causing a pullback on the hourly chart.
Traders should also keep an eye on the upward-sloping VWAP anchored to the recent October lows, as this provides a true average price for those who bought at the recent lows. As these two VWAPs converge, we will see who wins—the short-term momentum traders or those looking to ride the longer-term weakness.
Brent Crude Hourly Candle Chart
Past performance is not a reliable indicator of future results
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.67% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Geopolitical Tensions Fuel Oil's Rally
Last week, oil logged its biggest weekly gain in nearly two years, surging more than 8% as tensions in the Middle East intensified. The rally was sparked by growing fears of supply disruptions after Israel considered striking Iran’s oil infrastructure in retaliation for missile attacks. With Iran exporting 1.7 million barrels per day, any attack on its facilities could trigger a significant cut to global supply.
The risk of a broader conflict extends beyond Iran. Should Tehran retaliate or block the Strait of Hormuz—through which nearly 20% of the world’s oil flows—oil shipments from key producers like Saudi Arabia, the UAE, and Iraq could grind to a halt. Such a move would have devastating effects on global supply chains, with experts warning that oil prices could surge past $150 per barrel, leading to severe economic fallout. The mere speculation of these events has already fuelled the sharp rise in prices.
Technical Levels Align for Oil's Next Test
From a technical standpoint, oil’s rally has been impressive but faces a key test just ahead. Having broken through its 50-day moving average and the descending trendline, prices now sit just below the 200-day moving average—a major resistance zone that’s aligned with both the April and July swing highs. Additionally, the VWAP anchored to the April highs further bolsters this area as a point of confluence.
The RSI is elevated but still not in overbought territory, which leaves room for more upside if prices can clear the 200-day moving average. However, a failure to break above this resistance zone could signal a temporary top, especially if geopolitical tensions cool.
Brent Crude Daily Candle Chart
Past performance is not a reliable indicator of future results
Hourly Candle Chart – A Battle of the Timeframes
Drilling down to the detail of the hourly candle chart reveals a battle between short-term momentum and long-term weakness. Prices have already responded to the daily VWAP anchored to the April highs, causing a pullback on the hourly chart.
Traders should also keep an eye on the upward-sloping VWAP anchored to the recent October lows, as this provides a true average price for those who bought at the recent lows. As these two VWAPs converge, we will see who wins—the short-term momentum traders or those looking to ride the longer-term weakness.
Brent Crude Hourly Candle Chart
Past performance is not a reliable indicator of future results
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.67% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Disclaimer
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