Brent crude oil price steadies on concerns over the spare oil capacity

Crude oil prices have held steady above crucial resistance-turned-support levels as investors weigh the shipping disruptions caused by the ongoing US-Iran war. The recent release of 400 million barrels by the IEA did little to alleviate the supply concerns. The key holders of the world’s spare oil capacity, the UAE and Saudi Arabia, have been cut off from the global market through the blockage of the crucial Strait of Hormuz. 

Brent crude oil price outlook as US-Iran war enters third week

Brent oil price held steady above the psychologically crucial zone of $100 on early Monday as investors see no end in sight to the supply disruptions caused by the ongoing US-Iran war. In an interview with NBC News over the weekend, Trump asserted that he is not ready to reach a deal with Iran because “the terms aren’t good enough yet”. 

At the same time, he has called on other countries to help in reopening the crucial Strait of Hormuz. So far, that proposal has not gotten any response from the mentioned countries, which include Japan, China, the UK, and France. 

Iran has brought the global oil corridor to a standstill in retaliation to the US and Israeli attacks. According to analysts, only about five ships have successfully passed through the chokepoint since the war began slightly over two weeks ago. In comparison, prior to the attacks, this important passage handled an average of 138 vessels daily.

The International Energy Agency (IEA) has termed the ongoing shipping disruptions as the largest in history. Notably, the Strait of Hormuz is responsible for about a fifth of the world’s oil supply. 

Last week, IEA announced a major intervention by releasing 400 million barrels from the strategic reserves. However, that cannot meet the oil demand for more than a few days. This explains why the move had little impact on crude oil prices.  

Brent crude oil price technical analysis

Brent crude oil price chart | Source: TradingView

Brent oil futures extended Friday’s gains earlier on Monday as the ongoing US-Iran war fuels volatility. About a week ago, the benchmark for global oil prices skyrocketed to a four-year high at $119 before pulling back near the crucial support zone of $80 a barrel. Towards the end of last week, it rallied back above $100 as investors keenly weigh the shipping disruptions along the all-important Strait of Hormuz.

At the time of writing, Brent crude oil price was at $105. A look at its daily trading chart signals that the new week may be shaped by high volatility. At an RSI of 80, the asset is deep in the overbought territory. Indeed, even with the price fluctuations observed since the start of the US-Iran war, it has remained within this territory. 

While the market sentiment may yield some corrective pullback, Brent oil price will likely hold steady above the support level of $97.50. The entry of more buyers will yield a breakout past the current resistance zone of $106.50 as the bulls strive for a rally past $110. On the flip side, a further pullback may activate the lower support level at $93.45.