Oil reduces losses after US strikes Qeshm Island; CIA chief backs economic pressure

Hopes for a US-Iran deal strengthened yesterday, and crude oil extended its losses, after Iran's President said the Supreme Leader had widened the government's remit in the negotiations.

Markets took the news as a signal of greater flexibility to reach an agreement, since strategic decisions are always held by the Supreme Leader.

Oil prices still trimmed part of those losses, however, after US strikes hit sites on Iran's Qeshm Island overnight. According to US officials, the attacks answered Iran's firing at a US aircraft and did not mark the beginning of a wider military operation.

Trump said he did not intend to strike Iran after the midterm elections, though officials confirmed that all options remain on the table. Axios reported meanwhile that the CIA Director had advised Trump to keep a "no war, no deal" approach, which would let economic pressure on Iran continue.

A breakthrough in US-Iran negotiations would clearly set off a sharp crude oil selloff, on expectations of better supply. If the stalemate drags on, or escalates after the US elections, oil prices should remain supported.

Crude oil technical analysis – daily timeframe

Crude oil (CFD contract) extended yesterday's losses as hopes for a US-Iran deal increased. Price is now nearing the lower edge of the channel. Should it reach that level, buyers are expected to enter, accepting risk below the channel, to set up a rally toward the 110.00 resistance. Sellers, by contrast, would want a break lower to add bearish bets targeting the 68.00 support next, with the 87.00 level as the first target.

Crude oil technical analysis – 4 hour timeframe

Price broke below a minor support zone around the 100.00 level, which should now act as resistance. If price returns there, sellers are expected to step in, risking above the resistance, to keep aiming for a break below the channel. Buyers, meanwhile, will seek a break higher to join a rally toward the 110.00 resistance next.

Crude oil technical analysis – 1 hour timeframe

A minor upward trendline is defining the current pullback. Buyers will likely lean on that trendline, risking below it, to keep pushing toward new highs. Sellers, by contrast, will look for a break to add bearish bets toward the lower bound of the channel.

Upcoming catalysts

The US Job Openings data and the US midterm elections are due today, with the first results expected early tomorrow. Tomorrow brings the US ADP and the US ISM Services PMI. Thursday will deliver the latest US Jobless Claims figures. Friday closes the week with the US NFP report and the University of Michigan Consumer sentiment survey. Attention will stay on US-Iran negotiations.