Oil Price Forecast: WTI and Brent Rebound as US-Iran Talks Remain Uncertain

Oil prices improved slightly on Tuesday after the sharp drop in the previous session. Brent crude oil rose $88.40 per barrel while WTI increased to $81. The bounce indicates that the traders are still worried about the Middle East supply. The additional disruptions in the vicinity of the Strait of Hormuz could rapidly lead to the decrease in oil exports and an increase in oil prices.

Oil prices have dropped since President Trump halted additional attacks on Iran and indicated that negotiations are underway. This brought optimism over diplomatic deal and lowered the immediate threat to the oil supplies. But Iran presents some conflicting information about the ceasefire talks. This conflicting information further eroded the confidence in the market and contributed to oil price rally. The market could remain choppy until both parties demonstrate clear progress toward the agreement.

Oil shipping risks are also still weighing on oil prices. Some tankers have opted for safer routes and vessel traffic has decreased around the Strait of Hormuz. These distractions add up to extra time, extra fuel and extra insurance costs on the transport. As long as exports continue to increase through the Strait, some of the supply concerns may ease. But oil prices could still carry a geopolitical risk premium and could see a significant increase in the event of a further escalation of the conflict.

WTI Crude Oil Technical Analysis: $90 Breakout Could Target $100

The short-term outlook for WTI could remain uncertain as seen in the 4-hour chart. The price has again hit the short-term support of $77.50 and created a rebound higher. The support is marked by the neckline of the rounding bottom pattern that was formed in June.

From technical perspective, the price has already broken the descending channel pattern and is now hovering around the resistance of this channel. A clear break above $90 in WTI oil may push prices further towards the $100 region. On the other hand, a break below $77.50 may put further pressure on the WTI market towards the $65 area.

The strong uncertainty in the oil market is also observed on the weekly chart, as prices have traded between $70 and $120 over the past few months. As long as the situation in the Middle East remains uncertain and there is no clear resolution between the US and Iran, the market may fluctuate within wide ranges.

A clear break below $69 will likely put further pressure on the WTI market. But a break above $120 will open the door for strong rally in the oil market.

Brent Crude Oil Technical Analysis: $85 Support Keeps Recovery in Focus

The daily chart for Brent crude oil also shows that the price is consolidating above the 50-day SMA and appears uncertain as it remains below $90. The immediate support in the Brent crude oil market remains in the $85 region. A break below this level will push Brent crude oil further down towards the $81 area.

But a clear recovery above $90 will push the price towards the $100 region. As long as the price remains above the $85 region and the 50-day SMA, the potential for recovery in the Brent crude oil market remains high. Moreover, the RSI is also fluctuating above the midline which highlights positive short term price action.

The weekly chart for Brent crude oil also shows that the price consolidates near $80-$85 region after failure to break above $100 in July. The price remains highly volatile with no clear direction. However, the overall momentum in Brent crude oil has shifted to the upside after the Iran war. Therefore, the market may consolidate amid strong volatility.

Bottom Line

Oil prices may remain volatile as the uncertainty over the US-Iran conflict remains high. Any diplomatic progress could reduce supply concerns and pressure oil prices. But further shipping disruptions near the Strait of Hormuz could still push oil prices higher. WTI needs to break above $90 to target $100 while a drop below $77.50 could expose the $65 region. Brent may retain the positive outlook above $85 but a clear break above $90 is required to support a move towards $100.

Read more: WTI and Brent Eye Support as Iran Talks Ease Tensions