Oil prices have pulled back - but is the uptrend over?
Crude oil prices rallied on Friday, reaching a new medium-term high of $77.62 - the highest level since January - before pulling back below $73 and still closing over 7% higher. The sharp swings were driven by escalating tensions between Israel and Iran. Yesterday, crude oil closed 3.74% lower, but is trading 1.6% higher this morning, reflecting increased volatility in a news-driven market.
For oil markets specifically, these developments are worth monitoring:
- An Israeli strike ignited a fire at Iran’s South Pars gas field, causing a temporary production halt, and also targeted the Shahran oil depot. Despite this, the Strait of Hormuz remains open and vital energy flows continue.
- Market concerns focus on the potential closure of the Strait of Hormuz, but analysts see that risk as low given geopolitical and economic constraints. Iran needs oil revenue, and the U.S. is keen to avoid a spike in prices and inflation.
- The International Energy Agency (IEA) lowered its global oil demand forecast and raised supply estimates in its latest report. This reinforces market expectations that overall supply remains ample despite geopolitical disruptions.
- Central Bank Focus: While the Israel-Iran conflict drives near-term oil performance, this week features major central bank meetings including the FOMC tomorrow.
Daily Chart: Volatility Above $70
Crude oil accelerated its advance on Friday, but the uptrend failed to continue, with prices pulling back to around $69.40 yesterday. Key support remains near $69, marked by Friday’s gap-up opening. While the market reached its highest level since January on Friday, it still remains below the early January highs.
Weekly Chart: Testing the Downward Trend Line
On the weekly chart, crude oil prices approached a downward trend line that has been in place for over a year and currently is around $73. Overall, the market has returned to its 2023–2024 consolidation range. Key long-term resistance levels remain around $85–$90.
Conclusion
Crude oil is retracing part of yesterday’s nearly 4% pullback, climbing back above the $71 level. Investors are still responding to the escalating Israel-Iran conflict, making continued volatility likely.
For now, my short-term outlook is neutral.
Here’s the breakdown:
- Crude oil prices are retracing some of their yesterday’s pullback, but the market is likely to remain volatile and news-driven.
- The ongoing tariff-related volatility, combined with economic data, is adding to market uncertainty.
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Thank you.
Paul Rejczak,
Stock Trading Strategist
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