Oil prices remain headline-driven, taking direction from escalation and de-escalation in the U.S-Iran conflict in the near term. The first round of talks between the United States and Iran in Switzerland has concluded with positive comments from both sides, and an agreement to push for a final agreement within 60 days. However, there's considerable scepticism about whether more complex issues around nuclear technology and transit through the Strait of Hormuz can be fully resolved in the short timeframe. After all, the Joint Comprehensive Plan of Action (JCPOA) deal in 2015 took ~20 months of formal talks under former U.S. President Barack Obama. Brent crude for August delivery fell 4.79% to trade at $73.39 per barrel at 2.50 pm ET on Wednesday, the lowest settlement price since March 2nd, while the corresponding WTI crude contract was down 4.23% to change hands at $70.11/bbl.
According to commodity ***** ysts at Standard Chartered, the 200-day moving average (at $78.71/bbl on 23 June) has provided a level of support. However, that has proven to be insufficient during oil price selloffs at the 76.4% Fibonacci retracement at $73.74/bbl.
Both crude grades are firmly in oversold territory, with a relative strength index (RSI) of 29.07 for Brent and 28.13 for WTI crude. StanChart reports there has been a sharp rise in confirmed crossings of the Strait of Hormuz, with 71 total transits recorded from 19-21 June. However, these transits remain opportunistic and cautious, with the Strait still vulnerable to short-term closure, particularly after US-Iran rhetoric escalated during the latest round of talks.
Related: U.S. Crude Inventories Post Another Major Draw
While formal announcements around the timeline for normal operations to resume have been limited, the ***** ysts project that oil supply normalization is unlikely to occur before the third quarter of the current year.