Brent crude oil price continued rising on Wednesday after a new report suggested that President Donald Trump was considering a prolonged blockade in a bid to pressure Iran. It jumped to $110, up sharply from this month’s low of $87.
Trump considers prolonged blockade
A media report by Bloomberg suggests that President Trump is considering a prolonged blockade in a bid to put pressure on the Iranians as storage space runs out.
This is a reaction to a recent report in which Iranians submitted an offer to the US. Its offer was to reopen the Strait of Hormuz in exchange for deferred talks on the nuclear program.
A continued closure of the Strait will lead to higher crude oil prices since 20% of all crude oil passes there.
Worse, there is a risk that the ceasefire will end, leading to the resumption of fighting. Analysts believe that the next phase of fighting will be worse as it will involve critical infrastructure.
In a recent post, Iran’s parliamentary speaker highlighted some of the cards, including bombing a critical Saudi Arabian pipeline that is delivering over 7 million barrels of oil per day.
He also pointed out that Houthis may help to close the Red Sea, which accounts for 12% of all oil shipments. This disruption will likely not be offset by the soaring US exports,which have jumped sharply in the past few weeks.
Therefore, the most likely scenario is where the West Texas Intermediate and Brent benchmarks continue rising in the coming months as long as the crisis continues.
Trump’s preparation for a prolonged ceasefire comes two weeks after he hinted at a long war by comparing the operation with other conflicts like Vietnam and Afghanistan.
Meanwhile, Brent crude oil price is reacting to the major breaking news that the United Arab Emirates (UAE) was exiting the OPEC cartel after decades.
Analysts believe that the country hopes to boost oil production, with estimates being that it can move from 3 million today to 5 million in the next few months. It is unclear whether other countries will follow the footsteps and exit the organization.
Brent crude oil price technical analysis
Crude oil price chart | Source: TradingView
The daily chart shows that the price of Brent bottomed at $87.47 on April 17th after the two sides announced their ceasefire. It then rebounded to the current $110 as the blockade continues.
The price has remained above the Supertrend indicator since January 12 this year, a sign that bulls remain in control. It also jumped above the 50-day and 100-day Exponential Moving Averages (EMA).
The Relative Strength Index (RSI) has moved above the neutral point at 50 and is pointing upwards.
Therefore, the most likely crude oil price forecast is bullish, with the next key target being at the year-to-date high of $119. A move above that price will point to more gains towards $120.
The bullish outlook aligns with the recent Goldman Sachs forecast. In their report, the analysts pointed to the ongoing tapping of oil reserves by the US and its allies.
On the flip side, a drop below the support at $100 will invalidate the bullish outlook and point to more downside.
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