Oil prices could rebound further in the short term as Israel could target Iranian oil facilities.
Oil prices rebound as geopolitical tensions escalate
Oil prices have rebounded strongly since the start of the week, rebounding by 8% due to geopolitical tensions in the Middle East. The rise accelerated on Thursday, with the price of a barrel jumping 5% yesterday after President Biden suggested that US officials were considering supporting an Israeli strike on Iranian oil facilities.
Iran often exports half or more of its oil production. Damage to oil infrastructure could impact global oil markets. If Iran loses much of its export capacity due to Israeli attacks, the country could decide to cause disruptions in the Strait of Hormuz, the world’s most important oil chokepoint, in order to raise oil prices.
While at the start of the week I published a bearish opinion on oil prices due to Saudi Arabia’s desire to regain market share from the end of the year, the short-term outlook The outlook for oil prices appears rather bullish given the likely escalation of geopolitical tensions.
Especially since speculators have a significant number of “short” positions on WTI and Brent oil futures contracts. A continued rise in oil prices could therefore force speculators to close their short selling positions, a phenomenon called “short squeeze”, which would amplify the rise in oil prices in the short term.
WTI Oil Price Daily Chart – Key Levels
The price of a barrel of WTI could continue its rebound to $76, or even $80
From a technical analysis point of view, the price of a barrel of oil exceeded its recent high at $71.50 yesterday, thus forming a “double bottom” pattern. This chart pattern reflects a change in sentiment among market participants, which is not surprising given recent developments, paving the way for a short-term bullish reversal.
The price of a barrel of WTI could continue its rebound to $76 in the short term, or even to the top of its former symmetrical triangle at $80, but the extent of the increase will most likely depend on the Israeli aftershocks and their damage.
| Entrée | Purchase above $71.50 |
| Objective | 76, then 80$ |
| Stop | 70$ |
| Risk/Return Ratio | >1 |
