The mood in the oil market swung dramatically on Monday:
In the morning it was very bullish, given that the US had joined the war against Iran over the weekend and given that the price had broken above its recent downtrend channel (albeit only just, see FIG 1).
Later in the day, though, that mood reversed dramatically. In particular, Iran’s response to the weekend attacks was measured (signalling their desire to de-escalate) and a ceasefire was eventually agreed (i.e. overnight).
The price, therefore, having opened higher, closed down 8.7% (Brent spot price), and below Friday’s intra-day lows. That resulted in a bearish key day reversal pattern (see FIG 1). That is a technical price pattern which signals a near term change of trend (i.e. from bullish to bearish in this instance).
Consistent with that change of trend, last week net speculative LONG positioning in oil rose to its highest (most bullish) level since early 2025 (i.e. a contrarian SELL signal, see FIG 2), while other models have also recently been on SELL/strong SELL (including our technical scoring system, see FIG 3). The price action, models, and newsflow setup is therefore bearish for oil.
Naturally, there are risks to a bearish view, not least (as has already been seen) a breakdown of that ceasefire and a resumption of hostilities. However, as we have noted in prior fundamental analysis, it’s a well-supplied market with global oil inventories likely to trend higher this year (especially if Iranian output remains uninterrupted).
Fig 1: Brent oil price futures, with 50 & 200 day moving averages (US$/barrel)
Fig 2: Brent oil net speculative LONG/SHORT positions vs. oil price (US$/barrel)
Fig 3: Medium term oil technical scoring system vs. oil price (US$/barrel)
