Here’s why Brent crude oil price may drop below $60 soon

Brent crude oil price retreated for three consecutive days, reaching its lowest level since April 7 this year. It has plunged from a high of $114 on May 4 to the current $91. This retreat may continue after forming a double-top pattern amid a US-Iran deal.

Technical analysis points to a steeper Brent crude oil price crash

The daily chart shows that Brent crude oil price retreated sharply, moving from $114 to $91 today. It formed a down-gap on Monday as details of a new US-Iran deal emerged.

It has dropped below the 38.2% Fibonacci Retracement level of $96 and the 50-day moving average of $99. At the same time, the Relative Strength Index (RSI) has dropped below the neutral point of 50 and moved to its lowest point since December 18 this year.

Most importantly, the price formed a double-top pattern at $114.97 and a neckline at $86.15, its lowest point on April 7. This pattern has a depth of $28. Subtracting this amount from the neckline gives it a target of $58. 

Brent crude oil price chart | Source: TradingView

Deal to reopen Strait of Hormuz nears

The main catalyst for the ongoing crude oil price crash is that the US and Iran have neared a deal to reopen the Strait of Hormuz for the first time since the war started.

This deal will see Iran allow oil tankers to pass through the narrow strait without charging tolls. The US will also end its blockade and ease some of the Iranian sanctions that will let it sell millions of barrels of oil a day. Iran will also get access to some of its cash that has been locked up abroad.

Still, Trump is yet to sign this 60-day ceasefire, and some of his closest allies have blasted its outline. This includes people like Ted Cruz and Lindsey Graham, who have advocated for more fighting.

Israel has also fumed about the deal and is working to undermine it. It has launched attacks on Lebanon throughout the week. And in a major statement overnight, he ordered the Israeli military to take 70% of Gaza, a move that will infuriate Iran. It also moves against the peace deal that Israel signed with the United States.

Trump will likely agree to a deal because he has demonstrated that he don’t want to go back to war. He has also received major warnings from some of the top leaders in the industry. For example, in a statement on Thursday, the head of Exxon warned that oil inventories would hit dangerously low levels, forcing prices to jump sharply.

Data released this week showed that US inventories dropped by 3.3 million barrels last week, the tenth consecutive week of declines. Analysts were expecting the inventories to drop by 4 million barrels.