Crude Oil Futures Surging On U.S.-Iran Tensions

Crude Oil futures (/CL) are up +2.3% in early trading with this morning’s news reports saying the U.S. military is ready to attack Iran as early as this weekend after a swift buildup of forces in the region – though President Trump has yet to make a final decision on whether to proceed thus far. The tension comes as the U.S. demands Iran ends its nuclear weapon uranium enrichment programs as well as the Iranian government’s crackdowns on anti-government protests.

This situation obviously has major potential ramifications for global energy supplies. Iran is a major oil producing region, accounting for about 4% of global demand according to the U.S. Energy Information Administration. But even more importantly, this is where the Strait of Hormuz lies, which is the only sea passage from the Persian Gulf into the ocean. This is a critically important region from a strategic perspective as about 20% of the world’s oil must come through this area.

Crude oil futures now sit near a notable previous high from Sept. 26 of 66.42, after previously failing to break out to the upside on Jan. 29 and retreating back to a familiar supportive area near 62. This area near 62-63 is the yearly Volume Profile Point of Control (heaviest trading volume) meaning it presents a significant supportive point to watch. Momentum also seems more geared toward the upside, as the Relative Strength Index is making new relative highs along with price and breaking its short-term downward trendline.

If price continues its push and breaks above the highs near 66.42, volume starts to thin out significantly so traders could see fast-moving prices. The next significant resistance point to watch then is near 70.50, as it represents another notable high from Jul. 30. From there, another much smaller volume node lies around 72, so this could present another potential hurdle for price action. If the upside move fizzles and tensions start to ease, watch for price to retreat back to the VPPOC near 63. 

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