The largest G7 release of oil reserves in history is unlikely to lower oil prices much

FUNDAMENTAL
OVERVIEW

Oil prices stabilized in
the $80–90 range this week as G7 countries began discussing the possibility of
releasing emergency oil reserves to ease pressure on the market. If it happens,
the release would be the largest in history.

For now, the mere
discussion seems to be capping the upside, but no concrete action has been
taken yet. It looks like they are mainly trying to “jawbone” oil prices by
keeping the option on the table and signalling that they’re ready to act if
needed.

Even if they do go ahead
with the release, it would likely be only a short-term fix. In fact, the market
could even see a classic “sell the fact” reaction, where prices move higher
after the reserves are actually released.

The underlying issue
remains the closure of the Strait of Hormuz. Until there is a genuine
de-escalation, the downside in oil prices is likely to remain limited.

CRUDE OIL
TECHNICAL ANALYSIS – DAILY TIMEFRAME

On the daily chart, we can
see that crude oil dropped all the way back to last June’s high and bounced. If
the price rises back to the key 94.00 resistance zone, we can expect the
sellers to step in with a defined risk above the resistance to position for a
drop back into the 78.00 support targeting a breakout. The buyers, on the other
hand, will look for a break higher to increase the bullish bets into new highs.

CRUDE OIL TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME

On the 4 hour chart, we can
see that the price stabilised as the discussions about a G7 oil reserves
release capped the upside. There’s not much else we can glean from this
timeframe, so we need to zoom in to see some more details.

CRUDE OIL TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME

On the 1 hour chart, we can
see that the recent price action might have formed an inverted head and
shoulders pattern. The price has already broken above the neckline and it’s now
retesting it. The buyers will likely step in here with a defined risk below the
most recent swing low to position for a rally into new highs. The sellers, on
the other hand, will want to see the price falling back below the neckline to
pile in for a drop back into the 78.00 support. The red lines define the average daily range for today.

UPCOMING CATALYSTS

Today we have the US CPI report. Tomorrow, we get the latest US Jobless
Claims figures. On Friday, we conclude the week with the US PCE price index,
the University of Michigan Consumer Sentiment survey and the Job Openings data.
As a reminder, the market focus right now is solely on the US-Iran war, so the
data might not matter much.