WTI and Brent Slide on Pakistan-Iran Talks Report

Trump said he is close to deciding on a massive attack against Iran. Rubio described the approach as a head for an eye. The Houthis struck two Saudi tankers near Bab el-Mandeb this week. Iran is still responding to every round of U.S. strikes. Friday's pullback lowered the temperature. One tanker attack, one halt in Saudi Red Sea exports or one broader U.S. strike over the weekend and the premium is back Monday morning.

UBS does not see Middle East shipping recovering quickly even if the fighting eases. The process depends on more vessels entering the region and those flows are depressed. Saudi Arabia has spare production capacity. Spare capacity sitting behind two impaired chokepoints is not the same as barrels reaching buyers. The Red Sea was the workaround when Hormuz went bad and that workaround took fire this week.

UBS has Brent at $85 by year-end if everything normalizes. Friday was not about year-end. Friday was about surviving the weekend after a 10% weekly rally with a president who has not decided whether to escalate or negotiate.

September WTI Crude Oil futures finished inside Thursday's trading range, below the previous main top at $89.90. That top was the trigger point that launched the rally into $93.50 the previous session, technical analyst James Hyerczyk wrote. If the selling pressure continues, the next target is a short-term retracement zone at $84.54 to $81.21. The 50-day moving average at $80.96 would be the next target price. On the upside, a trade through $93.50 will signal a resumption of the uptrend with the next potential breakout level at $95.30.

September Brent crude oil futures settled inside the previous day's trading range on Friday, indicating investor indecision and impending volatility, Hyerczyk said. The main trend is up. Taking out $102.00 then the May 18 main top at $103.26 will signal a resumption of the uptrend. On the downside, a trade through $94.89 will be the first sign of weakness. If this move creates enough downside momentum, the selling could extend into the intermediate retracement zone at $90.61 to $86.70. The major support and trend indicator is the 50-day moving average at $85.48.

Tanker traffic and military decisions are the signals, not the Friday close. Regular Hormuz transits, lower insurance costs and Saudi cargoes moving through the Red Sea without diversion would give sellers a real reason to press. None of those things happened this week. The market sold the diplomatic headline Friday. The war premium came out of positioning, not out of the supply picture. Both contracts still finished the week up roughly 10% and the route has to actually reopen before that premium leaves for good.