As the XTI/USD chart shows, the price of a barrel climbed above $60 this week, reaching a one-month high.
The main bullish driver has been large-scale anti-government protests in Iran, which could lead to a change of power and/or military action. Trump has voiced support for the protesters and threatened 25% tariffs on all countries trading with Iran. Market participants fear that Iranian oil supplies (around 1.5–2 mb/d) could simply disappear, or that the Strait of Hormuz could be closed.
Technical Analysis of the XTI/USD Chart
On 5 January, we:
→ used WTI price fluctuations to draw a descending channel (shown in red);
→ highlighted the long lower wicks formed when the price touched the lower boundary of the channel as evidence of strong demand (and a bear trap);
→ outlined a scenario involving a bullish impulse.
Indeed, since then the oil price has moved higher, with:
→ the upper boundary of the descending channel being broken, while the breakout level (around $58.35) subsequently acting as support (shown by the arrow);
→ fresh data providing grounds for plotting an upward trajectory.
After an attempted rise yesterday, downward momentum can be observed this morning (shown by the arrow). Given the rapid pace of WTI’s advance (around 2.7% since the start of the week), it is technically reasonable to assume that the market is vulnerable to a correction. The situation suggests that bulls may lack the strength to keep the price above the psychological $60 level. The market may also be sceptical that Trump will allow oil to remain this expensive (the President has said he wants a $53 barrel).
However, if geopolitical tensions in Iran (and other regions) intensify further, this could drive WTI prices even higher.
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