Crude Stalls as Fragile Ceasefire Headlines Clash with Reality

Update:
A ceasefire deal between Israel and Lebanon was “announced” yesterday mid-morning. The headline, followed up by a tweet from President Trump, stymied the momentum we had seen in crude to start the session. Iran has made a ceasefire between Lebanon / Israel a precursor to continuing negotiations.

While Israel announced the potential ceasefire the IDF simultaneously launched a reported 50 air-strikes on Southern Lebanon. Also, Israeli officials have made it clear that they will not remove military forces from the new “Buffer Zone” which was apart of Southern Lebanon two weeks ago. This could be a non-starter for Iran.

Tuesday marks the end of the US-Iran short term ceasefire and there’s been little progress. The blockade put in place by the US was a shot at China, who will respond with new trade measures in retaliation (reportedly) if the US maintains the stoppage post Trump visit.

The ceasefire situation across the board is flimsy and this situation can go in any direction. Betting on a peace deal is tough – in my opinion as Iranian demands are steep and leave us in a worse situation than when we started.

Iran announced yesterday that all Strait of Hormuz Tolls would have to be paid to Iranian banks – – which would require the lifting of US Economic Sanctions.

They’re also demanding billions in payments from the US for damages, and will likely try and pressure Israel to move out of Southern Lebanon.

If the US agreed to these terms – it would be a clear loss on this conflict, solidifying this move as a pretty historic policy-error by this administration.

Technical Summary
 

While the ceasefire headlines and negotiation rumor mill continue to pressure crude, our low / stop area for tactical longs yesterday has held up ok through the overnight (86.27-88.13***) – for safety, we like stops near the 84.37 level (as seen in the charts above/below).

Despite the rhetoric, we still like being tactically long here. But traders should recognize that random volatility is a headwind to this trade and it’s nowhere near a full conviction position.   

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