Crude oil prices have pulled back in the past two weeks as investors focused on reports of the rising flows through the Strait of Hormuz. Brent dropped to $97.7, while the West Texas Intermediate (WTI) fell to $90, also as Saudi Arabia restarted the East-West pipeline. This article provides a forecast on whether prices will fall or rise in October.
October to be crucial for Crude oil prices
Brent and WTI prices pulled back as investors focused on reports of the rising flows through the Strait of Hormuz. Media reports suggest that millions of barrels are flowing, helped by the US military, which has continued providing escorts to tankers.
A report by CNN showed that traffic through the Strait was nearing pre-war levels and suggested that Iran was losing its leverage. This explains why President Donald Trump rejected Iran’s seven-point proposal.
At the same time, the two sides have not engaged in any major kinetic activity in the past few weeks. Also, Saudi Arabia has restarted the East-West pipeline that moves millions of barrels of oil.
Crude oil prices are reacting to the fact that the US has authorized the release of over 40 million barrels of crude oil from the Strategic Petroleum Reserves. The release will boost the amount of oil supplies.
The main catalyst for crude oil prices in October will be the expected “October Surprise” that analysts believe will happen. This is a situation where Iran escalates in a bid to push oil prices higher and punish President Donald Trump at the midterm elections.
Iran has several ways to escalate. It can launch direct attacks on US warships near the region, bomb the East-West pipeline, and even energy infrastructure in the region. Such a move will lead to higher oil prices during the month.
Brent crude oil prices technical analysis
Technicals suggest that crude oil prices will likely bounce back in the coming weeks. As the chart shows, Brent has remained above the ascending trendline that links the lowest levels since July this year. This trendline has provided it with substantial support in the past few months.
The price has also found dynamic support along the 50-day Exponential Moving Average (EMA). Most notably, there are signs that the price is slowly forming a falling wedge pattern, which is a common bullish reversal sign in technical analysis.
Therefore, there is a risk that Brent and the WTI prices will bounce back, potentially to the key resistance level of $109.96. A surge above that level will point to more gains, potentially to the year-to-date high of $119.
On the other hand, if the period of calm remains, there is a likelihood that prices will continue falling, potentially to below $80.
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