26.06.202608:44 Forex Analysis & Reviews: Oil Set to Close the Week with a Significant Loss

It appears that oil is heading for its third consecutive weekly decline. Today, Brent fell below $74 per barrel, while WTI is trading around $70. For the week, futures have lost more than 8 percent. The situation has ceased to be one-sided. The day before, both benchmarks surged by more than 2 percent for the first time this week after the container ship Ever Lovely was struck by an unknown projectile southeast of Oman. The market received a sharp reminder that a fragile ceasefire is far from a lasting peace.

The attack on the vessel has negatively impacted the already fragile confidence of shipowners. Several tankers turned around early on Thursday after reportedly receiving warnings from the Iranian navy, and the International Maritime Organization suspended evacuation operations in the Strait.

Experts note that the situation is complicated by geographical detours. Since the usual route is reportedly mined, two alternative routes from the Gulf have emerged. One passes near Iran, while the other skirts the coast of Oman under U.S. protection. Iran's Gulf Affairs Office stated yesterday that transit along routes outside its jurisdiction will not guarantee safe passage. This is essentially an attempt by Tehran to maintain leverage over the Strait even after the memorandum is signed.

Nevertheless, the overall downward trend in oil prices persists, and the attack has only slowed it down, not reversed it. Yesterday's 2 percent increase was a technical bounce, not a fundamental shift in direction. Let me remind you that even before the attack, futures briefly erased all military gains, dropping to pre-war levels.

The fundamental picture continues to pressure prices, driven by the rapid recovery in supplies. Earlier this week, the outflow of oil from the Persian Gulf was the fastest since the start of the war. Goldman Sachs estimates current exports at nearly two-thirds of normal levels and notes that the notable reduction in global inventories has slowed. Gulf producers are quickly ramping up production, even as they face a shortage of tankers for transportation. The UAE, Kuwait, and Qatar are increasing their supplies, as we discussed recently. An interesting detail highlights the scale of logistical distortions.

The political backdrop adds to the uncertainty. Trump stated on Thursday evening that the Strait is open while also mentioning that Iran will purchase American agricultural products with funds from frozen assets. Tehran disputes this, and such discrepancies in the interpretation of the deal's terms have emerged more than once, familiar from previous weeks of negotiations.

As for the current technical picture of oil, buyers need to overcome the nearest resistance at $74.85. This would allow them to target $81.38, above which it will be quite challenging to break through. The furthest goal will be the $86.67 area. In the event of a decline in oil prices, bears will try to gain control of $67.77. If this is achieved, breaking through this range will deal a serious blow to the bulls' positions and push oil down to a low of $59.96, with the potential to reach $51.99.