Crude oil price forecast as Trump launches Project Freedom

Crude oil prices pulled back on Monday morning after President Donald Trump announced the launch of Project Freedom, a move meant to escort ships crossing the Strait of Hormuz. The West Texas Intermediate (WTI) dropped to $99.25 from last week’s high of $110. Similarly, Brent dropped to $108.

Donald Trump announces Project Freedom 

In a Truth Social post timed before the markets opened on Monday, President Donald Trump announced that the US would start escorting ships through the Strait of Hormuz.

This is one of Trump's several improvisations to ensure the crude oil and other items moved safely through the Strait. For example, when the war started, he announced that the US would offer insurance services and escorts to ships.

The challenge, however, is that the US does not have control for the Strait despite its military might. Iran has already mined some routes and will always have a say on who is able to pass.

Most notably, ships will always resist passing the Strait even with US escorts because of the risk involved, including drone attacks by the Iranians.

Trump points to positive discussions with Iran 

Meanwhile, President Donald Trump hinted that the US was having some positive discussions with the Iranians that may lead to a deal.

While talks between the two sides have stalled recently, they have remained engaged. Iran sent the US a modified list of demands last week. According to Axios, the US sent the Iranians another amendment draft in response to what Iranians have demanded.

The back-and-forth engagement is happening as Trump has realized that restarting the war will be a bad idea as Iran has an escalation advantage. For one, the US can only focus on the Iranian public infrastructure and power plants.

Iran, on the other hand, can close the Red Sea, where Saudi Arabia is selling millions of barrels of oil. At the same time, it can attack and destroy crucial energy infrastructure in the Persian gulf, a move that will lead to higher crude oil prices.

The escalation ladder means that President Trump will get a worse deal than what Iran proposed before the war started in February. At the time, Iran was willing to make major concessions, including diluting its enriched uranium. 

In today’s case, Iran will likely receive sanctions relief, maintain its control of the Strait of Hormuz, and a guarantee that the United States will not attack again. 

Crude oil prices are also reacting to a symbolic OPEC+ statement to increase oil supply. This statement is symbolic because some of its key members, including Saudi Arabia are struggling to hit their targets because of the ongoing blockade.

WTI crude oil price technical analysis 

Crude oil price chart | Source: TradingView 

The daily timeframe chart shows that the WTI crude oil price has pulled back in the past few days, moving from a high of $110 to the current $101.

The price retreated on Monday after the Trump statement on Project Freedom and then pared back some of the losses. It has remained above the 50-day Exponential Moving Average (EMA).

A closer look shows that it is now forming a diamond reversal pattern, a common bearish reversal sign in technical analysis. This means that the price may retreat in the coming days, potentially to the psychological level of $95.