The WTI crude oil price dropped to the important support level at $100 on Wednesday after Donald Trump paused the newly launched Project Freedom. It has retreated by 15% from its highest point this year. Similarly, Brent, the global benchmark, fell to $108 from this week’s high of $114.
Trump suspends Project Freedom
Crude oil prices dropped after President Trump announced that he had suspended Project Freedom, which he launched on Monday this week. This operation aimed at providing ships help as they crossed the vital Strait of Hormuz.
In his statement, Trump said that the decision happened at the request of Pakistan, which has led the talks. He also said that the two sides had made a lot of progress during talks and that the pause will be for a short time.
Still, Trump noted that the blockade would remain, meaning that it will take time for oil tankers from the Persian Gulf to cross the Hormuz Strait. Also, analysts believe that the pause happened because of the difficulty of implementing the plan.
On Monday, Iran’s IRGC fired shots at US military ships in the region. It also launched attacks against a South Korean ship that attempted to cross the Strait of Hormuz. Most notably, it attacked a major oil terminal in the United Arab Emirates (UAE).
Trump has been afraid of restarting his war with Iran during the ongoing ceasefire because of its implications. For one, any strikes will see Iran bomb crucial oil infrastructure, a move that will affect oil supply for longer even when the war ends.
Analysts believe that Iran has more tools to deal with Trump if he decides to escalate. For example, it can collaborate with Houthis to block the Red Sea, where millions of oil barrels are flowing each day. It can also bomb oil infrastructure in the region, including on countries like Kuwait, Qatar, and Saudi Arabia.
Most importantly, Iran can strike and destroy desalination plants, a notable thing since these countries are desert.
WTI crude oil price technical analysis
WTI crude oil chart | Source: TradingView
The daily chart reveals that the WTI crude oil price has slumped in the past few days. It peaked at $110.95 on April 30 and has now retreated to $100.
A closer look shows that it has dropped below the 23.6% Fibonacci Retracement level at $104. Also, it is attempting to move below the Major S/R Pivot Point of the Murrey Math Lines tool.
Oil has also formed a diamond reversal pattern, which normally leads to a reversal. It has also formed a head-and-shoulders like pattern. Therefore, there is a risk that the price will drop further in the near term, potentially to the key support at $75. This price is along the Strong, Pivot, and Reverse level of the Murrey Math Lines tool.
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