On Wednesday, crude oil lost over 1% and dropped to $102.20 as Iranian foreign minister revived hopes of progress in talks about Tehran's nuclear program, and as U.S. crude oil inventories posted a large build. This was light crude’s fifth straight session of losses and its longest daily losing streak since the beginning of August.
Yesterday, Iranian President Hassan Rouhani said in a newspaper interview that he wants to reach a deal with world powers on Tehran's nuclear program in three to six months. Iran has agreed to talks on its nuclear program with top diplomats from six world powers, including U.S. Secretary of State John Kerry, strengthening expectations that Tehran's relations with the United States could thaw.
The U.S. Energy Information Administration weekly inventory data, which showed a 2.6 million barrel build in domestic crude inventories, was an additional bearish factor, that pushed the price of light crude lower.
What impact did these events have on crude oil’s technical situation?
The price of crude oil declined below the August low and the 38.2% Fibonacci retracement level on an intra-day basis and then pulled back up slightly. In spite of this barely visible upward move, crude oil closed below the rising medium-term support line. However, the breakdown is not confirmed, so while this has bearish implications for the short-term picture, they are not very strong just yet.
To summarize: light crude remains in a strong support zone based on the August low, the 38.2% Fibonacci retracement. If the breakdown below this support zone is confirmed, we will likely suggest opening short positions. We’re on standby just now.
Very short-term outlook: bearish
Short-term outlook: mixed
Medium-term outlook: bullish
Long-term outlook: bullish
Trading position (short-term): we do not suggest opening short positions at the moment. Although the situation is bearish on a very short-term basis, the trade looks risky because of the strong support zone. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.
Thank you,
Nadia Simmons
