Oil News: Crude Oil Futures Flip Higher as War Risk Lifts Oil Outlook

Crude Oil Flips Higher Overnight as War Risk Stays Elevated

Crude oil prices are edging higher overnight on Friday after recovering from early session weakness. Both WTI and Brent were initially softer as headlines pointed to easing tensions. However, both benchmarks have since flipped to the upside, showing resilience as the fear of a prolonged war continued to underpin prices.

With the prospect of the war escalating at any time, oil remains supported by the ongoing geopolitical risks. Additionally, traders appear reluctant to drive prices significantly lower, keeping crude oil at elevated levels even if headlines tied to President Trump continue to briefly improve sentiment at times. But when you stand back and look at the weekly price action, you can clearly see that he may actually be the source of the volatility.

At 08:41 GMT, May WTI crude oil futures are trading $96.05, up $1.57 or 1.66%.

Diplomacy Is Making Noise but the War Is Still Running the Show

Despite the back and forth “he said, she said” headlines between the U.S. and Iran, traders continue to focus on the war between the two countries with high uncertainty. Although today’s headlines point at Trump delaying potential strikes on Iranian nuclear sites and Iran’s limited cooperation by letting 10 oil tankers pass through the Strait of Hormuz, there is still no clear resolution in sight.

I think the military buildup in the region and threats to key infrastructure, including Kharg Island, are responsible for keeping risk premiums elevated. Additionally, traders are still pricing oil based on how long the conflict may last rather than reacting only to promising, yet disappointing, diplomatic developments.

Technical Outlook

Technically, the main trend is still up according to the swing chart and a pair of moving averages. Overtaking a key trend line at $95.27 will reaffirm the uptrend.

The nearest minor swing bottom support is $84.37. Taking out this level will shift momentum to the downside. The nearest main swing bottom is $75.64. The trend will change to down if this bottom fails, in my opinion.

The major moving average support is the 50-day at $73.28 and the 200-day at $63.85. The fact that the short-term MA is higher than the long-term MA is a sign of strength.

Retracement zone resistance at $94.53 to $98.98 has been capping gains for over two weeks. Retracement zone support at $84.19 to $77.29 essentially stopped the selling at $84.37 on Monday.

The Strait of Hormuz Is the Wildcard Nobody Is Talking About Enough

Another critical focal point is the Strait of Hormuz. Although there have been partial oil flows through the Strait, for the most part, it has been closed. Millions of barrels of oil have been impacted by this significant disruption, tightening global supply. We’ve witnessed the market absorbing the supply shock so far, but if the blockade continues into April, we’re going to start seeing a decline in inventories.

The Supply Cushion Is Shrinking Faster Than the Market Realizes

In my opinion, I think it’s wrong to think the oil market is still well-supplied. We’re currently in a situation where stored crude and excess supply is being used up quickly. So with the ongoing supply losses, any new disruptions are likely to trigger a breakout to the upside. I also think the focus has shifted to the potential for supply shocks rather than demand weakness.

Iran Has to Make a Decision and the Clock Is Running Out

Looking ahead, crude oil has reached another critical juncture. Iran has to take the deal sometime next week, or face a fresh bombing campaign from the U.S. The current setup favors higher prices as long as the geopolitical risks and supply constraints persist. Technically, crossing to the bullish side of the trend line at $95.27 will indicate the buying is strengthening.

More Information in our Economic Calendar.