Crude oil prices jumped for the third consecutive day, with Brent hitting a high of $83.75, up by 7.30% from its lowest level this week. This rebound happened after China boosted its oil purchases and after Iran published details of the Strait of Hormuz reopening.
China boosts oil purchases
One reason why crude oil prices have not surged during the US-Iran war is that China has largely stayed away from the market.
Now, however, there are signs that Beijing is starting to buy oil again as its strategic petroleum reserves fall. Data released today showed that pipeline and seaborne flows jumped to 35.73 million tons in July, up by 22% from a month earlier.
It imported about 8.45 million barrels of crude oil per day. While this is much lower than it used to import before the war, there is a possibility that Beijing will increase its purchases later this year.
Such a move will lead to more oil demand as the country rushes to fill its strategic petroleum reserves. This is important because China is the biggest importer of crude oil in the world.
Iran shares details of its deal with Oman
Crude oil prices are also rising as investors react to the details of the Iran-Oman deal to reopen the Strait of Hormuz. One notable part of the deal is that the two sides will not charge a toll for now.
However, Iran will control inbound traffic, while Oman will control the outbound one. As part of the agreement, Iran has insisted that it will not allow U.S and Israeli ships to transit the strait. Also, countries that have harmed Iran will not be allowed to pass through the Strait until a compensation plan is made. Iran plans to impose a 20% fee for these countries.
It is unclear whether the Trump administration will endorse the deal. Also, it is unclear whether Trump will end the blockade it has placed on Iran. What is clear, however, is that the Strait of Hormuz will not go back to how it used to be in the future.
In the long-term, countries like Saudi Arabia and the UAE will invest heavily in pipelines to avoid the Strait. Indeed, the UAE has said that it will be independent of the Strait in the coming years.
Meanwhile, Houthis have continued to attack Saudi Arabian ships and troops. They attacked a Saudi tanker in the Red Sea, off the coast from the Yanbu export terminal. An escalation could have an impact on oil prices.
Most notably, the US and Iran have not yet reached a ceasefire agreement, meaning that the war may resume at any time. Iran may also use the latest reports on US weapons to restart the war and put more pressure on Trump.
Brent crude oil price forecast
Crude oil price chart | Source: TradingView
The daily chart shows that Brent crude price peaked at $101.9 in July and then plunged to a low of $78.30 as Trump and Iran restarted their war. Recently, it bounced back to $83.70, which coincides with the 50-day Exponential Moving Average (EMA).
The price has moved above the Ultimate Support of the Murrey Math Lines level of $75. Therefore, the price will likely continue rising in the near term, potentially to the Major S/R pivot point of $100. A drop below the support of $78 will invalidate the bullish outlook.
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