Oil prices dropped significantly on Monday as the talks between Iran and Qatar lifted hopes for the end of war between the US and Iran. WTI crude oil lost nearly 6.50% on Monday while Brent oil lost nearly 6.69%.
However, oil prices rebounded on Tuesday due to reports of US strike on Qeshm Island in Iran. These reports have increased fears of disruptions in the Middle East. If tensions in the Middle East escalate further, they may threaten the traffic of tankers in the Middle East and delay the return of supplies. This risk may support prices despite the sell-off.
In my view, any progress toward peace deal between the US and Iran may ease oil prices. However, new attacks in the Middle East and further escalation in the conflict may continue to increase prices.
WTI Oil Price Forecast: A $106 Breakout Could Open the Way to $150
The monthly chart for WTI oil shows that the price failed at the long-term resistance of the descending channel pattern near $106 and dropped toward the $95.15 level. If the peace talks develop between the US and Iran, oil prices may continue to correct lower toward the support region.
However, any escalation in the Middle East may push WTI oil above the $106 area. A confirmed monthly close above $106 will likely break descending channel pattern and open the way for further upside toward $150. But $125 to $130 may be the initial resistance before the $150 area. A break below the $80 region will likely open the way for further downside toward the $55 to $60 area.
The weekly chart for WTI oil shows that the price has been consolidating between $69 and $120 since the US-Iran war began. When price reaches the $70 area, it triggers a strong rebound. The price must break this range to continue higher.
However, until oil prices break above the $120 region, prices may remain volatile in a wide range. The RSI remains above the midline, which suggests a positive trend in the WTI oil market in the medium term.
Brent Oil Price Forecast
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See all Brent Oil forecastsBrent Oil Price Forecast: $120 Remains the Key Resistance
The daily chart for Brent oil shows that the price dropped from near the $120 area which has been the key resistance level in the Brent oil market. The drop on Monday has pushed the price toward the 50-day SMA. The price is now consolidating around the 50-day SMA.
A break below the 50-day SMA at $107 will likely open the way for further drop toward the 200-day SMA near $98.50. But a clear break above $120 will likely open the way for further upside toward the $150 area.
The weekly chart for Brent oil shows that the recovery from the $70 region in June was V-shaped recovery. This recovery suggests positive price action in Brent oil. A clear break above $120 may push price toward the $125 to $135 area. On the other hand, significant support in Brent oil remains in the $100 region. As long as the price remains above $100, the possibility of strong rally in Brent oil is high.
What to Watch Next
Oil prices fluctuate in a wide range and remain volatile after the U.S.-Iran war. The market is watching for developments in the Middle East. Any new escalation in the conflict between the U.S. and Iran may support oil prices. However, talks about a peace deal may initiate a correction in oil prices.
WTI crude oil needs a monthly close above $106, which will likely break the long-term structure and open the way for further upside towards the $150 area. However, a break above $120 in Brent oil will likely strengthen the bullish structure and push prices higher. Brent oil must hold the key support level of $100 to remain bullish in the short term.