Crude oil rallied as much as 19% on Monday intraday, which was the biggest jump in three decades.
The first trading day this week was started on a crazy note, world oil-related currencies were racked by the Oil intraday gains following the drone attack on Saudi oil fields. On a safe-haven note, Gold, Silver, and Yen surge overnight with Treasuries. Now focus more on heightening tension between the US and Iran. The US blames Tehran for the attacks, despite claims by Houthi rebels in Yemen.
I want readers to see the below chart to find out how big the supply disruption is, published by Bloomberg.
We expect if the supply disruptions extend for weeks, the price could revisit the April 2019 high, as the Saudi attacks disrupt 5.7m b/d which is marginally higher than Iranian Revolution (5.6 m b/d).
Here is the gist of analysts forecast on Brent crude:
Goldman Sachs forecast $75/d and According to S&P Global Platts Analytics, the price may test $80/b whereas. These forecasts are 15% and 19% respectively, higher form the current trading price.
Whereas Danske Bank forecast $150/b in case of a war situation. In a research note today, the bank said, “A war between US/Saudi Arabia and Iran could lead to a significant oil price spike.”
Also reported, “In our view, in this case, we could easily see oil prices rise 200% over the course of a couple of months”.
Technically, the price breaches the five-month descending trendline/symmetrical triangle and has printed a higher low pattern on the weekly chart. A weekly close above $68.70 could rally towards $70.00-70.50 before flying further higher towards $74.70 April 2019 high.
Last week’s forecast: Trendline breakout
As shown in the below weekly chart, the A-B-C pattern is pointing at $80.00/b coincides with April 2018 high and S&P Platts forecast.
According to the hourly chart, the key support level is placed at $66.60, $65.30, and $63.90 levels.
The risk to the bullish view: If the production is restored any time sooner, the price might retrace towards the support levels.
Amin Nasser, Saudi Aramco’s CEO, said, “Work is underway to restore production, and a progress update will be provided in around 48 hours,” S&P Platts reported.
If the price starts moving higher, key resistance level to watch out for are $68.70 and $70.50. A decisive break out above $70.50 could allow the bulls to raise the headroom towards its April 2019 high.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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