Crude Oil Price Analysis – Crude Oil Spikes on Escalation of Conflict

Crude Oil Technical Analysis

The crude oil market in the light sweet crude grade had spiked towards the $120 level before pulling back quite drastically on Monday. In fact, we have seen a massive collapse from the initial push higher as the G7 countries are now talking about releasing stockpiles simultaneously to keep the oil markets under control.

That being said, I still think oil has a bit of a bid and I certainly am not looking to short this market. But this is another move like we had seen in silver a couple of times now where retail traders probably got in a little too late and now, they’re waiting to see whether or not they still have a trading account.

This is why you have to be very careful trading oil in this type of environment. In fact, the older you are and the longer you’ve been trading, the more likely you are not bothered with this market right now or maybe you’re trading ETF or something that isn’t quite as dangerous.

That being said, if we do pull back from here it’ll be interesting to see if $92 holds up. That would basically be filling the gap. I don’t think we break down below there, at least not yet, but who knows?

If you had told me the candlestick would look like this when I went to bed last night, I would have been kind of surprised by that too. This is the inherent problem with trading crude oil right now, there’s no predictability.

Brent Technical Analysis

Brent markets look very much the same. They at one point hit $120 area as well but have pulled back quite significantly, maybe not as much as the light sweet crude oil market, at least in percentage terms, but really that’s not a huge surprise considering that North American oil is perfectly safe and abundant.

The Brent market will be a little bit more impacted by what’s going on in the Persian Gulf as would medium sour crude and some other grades as well. So really, at this point in time, it’s going to be a case-by-case basis.

Eventually, the markets will start to price in the differentiation between places like the United States and places like China. Japan imports 100% of its oil, that will be a big problem for that economy, but in places like the United States which produces 14,000,000 barrels a day, it’s not as big of an issue and we are going to start to see the oil market come to that conclusion as well.

As things stand right now, it’s very much a buy on the dip scenario. I think the $85 level is probably a hard floor at the moment. We’re basically almost $20 above there, so we’re nowhere near it, but you can see how quickly oil can spike. With the G7 countries releasing stockpiles, you can also see how quickly it falls.

If there is some type of resolution to the war in the Gulf or the Straits of Hormuz actually get opened, this thing will collapse just as fast as it spiked the day before, so without a doubt one of the most dangerous places to be right now.

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