Summary:

• Oil is trading lower for the 2nd consecutive day
• Price appears to be running into resistance around $80 
• Strong Iranian sanctions comments from the US fail to drive price higher

The past few weeks have seen a series of notable moves in the Oil price, with the market hitting a 3 1/2 year high on Thursday above the $80 a barrel mark. The reason behind the latest gains seems to be the threat of new US sanctions on Iran removing a significant amount of supply from the market. However, the last few sessions have seen some weakness in the price action and whilst it would be a bold move to try and call a top in this strong bull market, there are some suggestions that it could be near. 

Thursday’s push to its highest level since 2014 was met with a pretty firm rebuttal as the market fell back below the $80 handle after reaching 80.49 intra-day, before Friday’s session saw the largest down day of the month. Today has seen more weakness with a lower low and lower high apparent at present in each of the last 3 sessions.    

 

 Oil has run into resistance around the $80 mark and shown a few negative signs in recent sessions. Source: xStation

One potentially telling development today has been the market’s reaction to comments from US secretary of state, which are best described as hawkish with regards to Iran. Selected remarks are as follows:

• US sanctions on Iran will be strongest in history
• US will apply unprecedented financial pressure on Iran 
• After sanctions come into full force, Iran will be battling to keep its economy alive

It is clear that Pompeo is trying to send a message to Tehran with some very strong rhetoric, but from a market point of view what does this mean? Oil did move off its lowest level of the day on these comments, but the move was relatively small and appears to have already fizzled out. This could be seen to reveal a diminishing sensitivity as far as traders are concerned to Iranian developments and mean that there is little more upside left in the market on the back of this story.

Looking at shorter time frames, price has dipped and closed below the Ichimoku cloud on H1 for the first time since the Iranian sanctions were announced. This may be seen to suggest the short term trend has turned lower and if price remains below the cloud then there is the possibility that some of the recent gains are handed back.  

 Oil has moved back below the cloud in H1 and this could be seen to signal that the short term trend has turned lower. Source: xStation