Crude Selling Deepens on Fresh Trade War Risks
Fading US/Iran Risks
Crude prices remain under pressure on Monday morning as the reversal from last week’s highs continues to develop. Easing tensions between the US and Iran have been the main driver behind the selling. Trump last week signalled that he would hold off from any sort of military action against Iran after it offered assurances that killing of protestors would cease. While state violence remains absent, crude should continue to soften as supply-risks are deemed less pressing. The prospect of a military conflict between the US and Iran had posed heavy supply risks given the amount of crude produced in the region, fuelling the rally we saw in crude over the first two weeks of the year. However, any news that Iran is once again targeting protestors should see crude prices spiking higher as the risk of US military action is brought back into focus.
Fresh Trade War Risks
Away from this issue, crude prices are also being weighed on today by the growing risks of a fresh trade war erupting over the US pursuit of Greenland. Trump announced over the weekend that that 10% tariffs will be applied against eight European countries from Feb 1st, and could rise as high as 25% by June, if they don’t co-operate with his plan to purchase Greenland. With EU leaders currently weighing options for counter-moves the near-term outlook for crude looks weaker given the prospect of a reduced demand if a trade war breaks out. More broadly, recession risks in the EU and UK should also amplify downside risks in crude if that worst case scenario develops.
Technical Views
Crude
The bull channel break in crude remains active for now though price failed above the 61.39 level and has since reversed. The key area now is the retest of the broken bear channel and the 57.57 level which bulls need to hold to maintain the broader bullish bias. Below there, 55.07 will be the next support to note.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.