Oil News: Crude Oil Outlook—Iran Tensions Ease, But Supply Risks Remain

WTI Rebounds from Key Support as Iran Tensions Simmer

WTI crude oil futures are trading higher on Friday after a successful test of a short-term retracement zone. Fundamentally, the violence has calmed in Iran, but the situation in the country is still tense. The price action reflects this, with traders looking for a happy medium like a pair of 50% levels at $58.93 to $58.52 while they sort out the details.

At 12:46 GMT, March WTI Crude Oil futures are trading $59.94, up $0.86 or +1.46%.

Supply Disruption Fears Fade After Trump’s Iran Assurances

Looking back, this week’s earlier surge to its highest level since September 29 was fueled by the fear of a supply disruption. Short-covering and speculative buying drove the rally to $62.20 in anticipation of an attack on Iran by the United States and a potential disruption in supply. But when President Trump took that off the table by saying he was satisfied that there wouldn’t be any more killing of protesters, speculators realized the odds of a supply disruption had fallen and that the market was overpriced. This triggered the sell-off into the retracement support zone.

Geopolitical Premium Persists Despite Reduced Threat

Sticking with the fundamentals, while U.S. military action against Iran and the possibility of a supply disruption have been dampened, they haven’t been eliminated, which means prices will continue to remain propped up but much closer to value.

Rising U.S. Inventories and Venezuelan Output Cap Upside

Another factor capping gains is supply. “Despite the steady drumbeat of geopolitical risks and macro speculation, the underlying balance still points to ample supply,” said Phillip Nova analyst Priyanka Sachdeva.

On Wednesday, the U.S. Energy Information Administration (EIA) reported that crude stockpiles in the U.S. rose by 3.391 million barrels in the week ended January 14, worse than the expected 1.7 million barrel draw.

In addition to the U.S. inventory build, Venezuela has begun rolling back oil production cuts imposed under a U.S. embargo. With crude exports expected to resume, the fear is supply will continue to grow.

Technical Picture: Uptrend Holds with Moving Averages Defining Range

Technically, the trend is up according to the daily swing chart. A trade through $62.20 will signal a resumption of the rally, with a trade through $55.65 changing the trend to down.

Resistance is the retracement zone at $59.80 to $60.96. Support is the previously mentioned 50% zone at $58.93 to $58.52.

WTI crude oil is also trading inside the 200-day moving average at $60.53 and the 50-day moving average at $58.28. This looks like the comfort zone for traders, so the market could become range-bound.

Weekend Outlook: Rangebound Trading Between Key Moving Averages

Looking into the close, if the geopolitical events in Iran remain dampened, prices are likely to hold between the two moving averages. However, since we’re heading into the weekend when anything can happen, I think we’re going to hold the 50% zone at $58.93 to $58.52 but lean toward the upper end of the range between $59.80 to $60.53.

More Information in our Economic Calendar.