Brent crude oil price steadies below crucial level amid high volatility

Crude oil price was steady on Tuesday after the surprise surge that had it approach $120 before pulling back below the psychologically crucial zone of $100. The volatility experienced in the new week is set to continue in the ensuing sessions as investors weigh the disruptions resulting from the US-Iran war. While Trump has asserted that the end is near, the Islamic Revolutionary Guard Corps have indicated that Iran will determine how the war ends. 

Brent oil steadies below $100

Crude oil price entered the new week on a high to trade at its highest level since 2022 when Russia invaded Ukraine. Heightened fear over continued shipping disruptions along the all-important Strait of Hormuz had Brent oil futures rise by 31% overnight to a triple-digit level of $119 a barrel.

While geopolitical tensions in the Middle East continue to offer support to the asset, it plunged back below the psychologically crucial zone of $100 in early Tuesday trade. At the time of writing, Brent oil price was trading at $90.69. Similarly, WTI futures were at $86.33 after dropping from Monday’s intraday high of $119.40. 

Based on the recent price movements, crude oil will likely remain highly volatile in the ensuing sessions. On the one hand, blockage of the Strait of Hormuz has led several oil-producing countries within the Gulf region to trim production as their on-land storage tanks fill up. 

Iraq is one of the first countries to cut production following the US-Iran war. Oil output from its southern fields has plunged by over 60% with its daily production averaging at 1.3 million barrels, down from 4.3 million bpd. Amid the onshore tanker traffic, Iraq’s oil exports have declined from 3.33 million bpd to 800,000 bpd. 

Kuwait and Saudi Arabia are also trimming production, with analysts warning that other countries may follow suit. For now, participants in the global oil market will have to wait and see if diplomatic efforts will help ease the geopolitical tensions in the Middle East.

According to the Islamic Revolutionary Guard Corps, Iran will “determine the end of the war”. It has further vowed that it will not allow “one litre of oil” to leave the region if strikes by Israeli and the US persist. 

On the other hand, President Trump has asserted that the war may end soon. Speaking during a CBS News interview, he stated that the war was “very complete, pretty much”. He added that the combat is set to end soon, though that may not occur in the coming week. 

Brent crude oil price technical analysis

The benchmark for global oil price, Brent, dropped back below $100 on Tuesday as investors eye the ongoing US-Iran war. Even with the significant decline, it remains in the overbought territory at an RSI of 78. 

In the short term, crude oil prices will likely remain volatile; hovering between a wider range of between $75 and $105. More specifically, the range between the support level of $86.50 and the resistance at $95.50 will be worth watching in the ensuing sessions. 

A further rebound may have the bulls facing resistance at $99.00 as they strive to bolster prices back above the psychologically crucial zone of $100 a barrel. On the flip side, a decline past the current range may activate the lower zone of $81.80 as the bulls defend the crucial support at $80. Below that zone, this thesis will be invalid.