Brent crude oil price retreated for three consecutive days as traders watched the ongoing negotiations between the US and Iran. It also slipped after the United Arab Emirates (UAE) confirmed that its new oil pipeline was 70% complete. It dropped to $104.25, down by 13% from its highest point this year.
UAE oil pipeline 70% complete
Brent crude oil price retreated as traders reacted to news that a new UAE pipeline to bypass the Strait of Hormuz was 70% complete. The remaining 30% will be completed early next year.
The UAE hopes that it will use the new pipeline will double the capacity through Fujairah, a port that sits on the Gulf of Oman, just past Hormuz.
It hopes that the pipeline will transport millions of barrels of oil per day, and potentially help its customers avoid paying the substantial tolls that Iranians are demanding.
The pipeline mirrors that made by Saudi Arabia that is now shipping over 7 million barrels of oil per day. This pipeline has helped stabilize oil prices since the war started.
Still, it will take time for the UAE’s oil pipeline to be completed, meaning that its impact on the ongoing Iran war will be limited.
Uranium and tolls are a major hindrance
Crude oil price has also retreated this year after President Trump claimed that talks between the two countries were at an advanced stage. He said this as he postponed his planned attack against Iran after being forced by Gulf allies like Saudi Arabia and Qatar.
While negotiations have made some progress, the media suggests that Iran’s uranium stockpile and tolls have become major hindrances. The US believes that Iran will build a nuclear bomb if it retains its uranium stockpile. It will also make a good PR for Trump for Iran to give up the uranium.
Iran has insisted that it will not give away its highly enriched uranium to the United States. At the same time, it has maintained that it will maintain control of the Strait of Hormuz in collaboration with Oman.
Still, despite the progress, analysts and Iranian leaders believe that the US will launch a new decapitating attack to force Iran into a deal. The risk is that such an attack will lead to a more severe destruction of oil infrastructure in the region, a move that will affect energy supplies for years to come.
All this is happening as global oil inventories plunge at the fastest pace in years. Estimates are that inventories are falling by over 4 million barrels each day.
Brent crude oil price technical analysis
Crude oil prices chart | Source: TradingView
The daily chart reveals that the Brent crude oil has pulled back in the past few days and is hovering just over the key support at $100.
Technicals suggest that oil may resume the uptrend this year. For one, it has remained above the 50-day Exponential Moving Average (EMA) and is forming an inverted head-and-shoulders pattern.
Also, there are concerns that oil demand will surge as the US driving seasonstarts. Therefore, there is a likelihood that the prices will rebound in the near term, potentially to the key resistance at $114. A move above this level will point to more gains to $120.
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