Recap: The crude market soared on Thursday, reaching its highest level since early August, on increasing concerns over a possible U.S. military attack on Iran. U.S. President Donald Trump has increased pressure on Tehran to end its nuclear program, with threats of military strikes and the arrival of a U.S. naval group in the region. Sources stated that President Trump is considering options that include targeted strikes on security forces and leaders to inspire protesters to create conditions for a regime change. The oil market posted a low of $63.28 on the opening and continued on its upward trend amid the geopolitical escalation. The market extended its gains to over $3.20 as it rallied to a high of $66.48 by mid-morning. It later settled in a sideways trading range during the remainder of the session. The March WTI contract settled up $2.21 at $65.42 and the March Brent contract settled up $2.31 at $70.71. The product markets ended the session in mixed territory, with the heating oil market settling down 8.07 cents $2.5854 and the RB market settling up 2.77 cents at $1.92.
Technical Analysis: The oil market will remain well supported by the possibility of a U.S. military strike against Iran. The uncertainty of the Trump administration’s next move will continue to underpin the market. The crude market is seen finding resistance is seen at $66.48, $66.75, $67.74, $69.58, $70.41, $70.51 followed by $78.40. Meanwhile, support is seen at $64.00, $63.44, $63.28, $62.51, $62.07, $61.57, $60.14 followed by $59.52, $58.96 and $58.53.
Fundamental News: Sources said U.S. President Donald Trump is weighing options against Iran that include targeted strikes on security forces and leaders to inspire protesters , even as Israeli and Arab officials said air power alone would not topple the clerical rulers. Two U.S. sources familiar with the discussions said President Trump wanted to create conditions for “regime change” after a crackdown crushed a nationwide protest movement earlier this month. They said to do so, he was looking at options to hit commanders and institutions Washington holds responsible for the violence, to give protesters the confidence that they could overrun government and security buildings. One of the sources said President Trump has not yet made a final decision on a course of action including whether to take the military path. A second U.S. source said the options being discussed by President Trump’s aides also included a much larger strike intended to have lasting impact, possibly against the ballistic missiles that can reach U.S. allies in the Middle East or its nuclear enrichment programs.
Axios reported that the Trump administration is hosting senior defense and intelligence officials from Israel and Saudi Arabia for talks on Iran this week as U.S. President Donald Trump considers military strikes. The Axios report said the Israelis traveled to Washington to share intelligence on potential targets inside Iran, while Saudi officials sought to help avert a wider regional war by pushing for a diplomatic solution. Earlier this week, Saudi Crown Prince Mohammed bin Salman told Iranian President Masoud Pezeshkian that Riyadh would not allow its airspace or territory to be used for military actions against Tehran.
A U.S. official said the U.S. Navy has sent an additional warship to the Middle East, amid a large military buildup in the region and increasing tensions. The official said the USS Delbert D. Black had entered the region in the past 48 hours. This brings the number of destroyers in the Middle East to six, along with an aircraft carrier and three other littoral combat ships.
Citi analysts said that the potential of a military strike against Iran has escalated the geopolitical premium of oil prices by potentially $3 to $4/barrel. It added that further geopolitical escalation could push prices to as high as $72/barrel for Brent over the next three months.
Early Market Call – as of 8:25 AM EDT
WTI – Mar $65.21, down 30 cents
RBOB – Feb $1.9129, down 53 points
HO – Feb $2.6506, up 3.48 cents
