Societe Generale’s commodities team says Brent has dropped below its 50-day moving average for the first time since January and is probing support near $96 after forming a lower high around $113 last week. If that $96 floor gives way, the bank maps follow-on technical levels at the ascending trend line drawn since March around $91/$90, and then $86, implying scope for a deeper downtrend.
The team links near-term direction to reopening outcomes for the Strait of Hormuz. Under an early June reopening scenario, it projects Brent easing towards about $85 per barrel by year-end, whereas later resolutions could drive temporary spikes to roughly $150–$160. In a low-probability case where the passage remains shut through year-end, it sees Brent potentially exceeding $200 per barrel.
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Key Technical Levels And Near-Term Outlook
We see the market’s nervousness, with Brent crude having lost its 50-day moving average for the first time since January. The current test of support around the $96 per barrel level is critical for the weeks ahead. A failure to hold this line would invite further selling pressure.
If support at $96 breaks, we are looking at a potential slide toward the ascending trend line near $90-$91. An early June reopening of the Strait of Hormuz would reinforce this bearish view, likely nudging prices steadily down to around $85 by the end of the year. This remains the highest probability scenario based on current diplomatic chatter.
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Extreme Upside Risks And Trading Strategies
However, we must factor in the extreme upside risk, as any escalation in the Strait of Hormuz could send prices soaring. The CBOE Crude Oil Volatility Index (OVX) has already surged to 52, reflecting deep uncertainty and pricing in a potential move of over 4% per day. This is a level of fear we haven’t seen since the supply shocks of 2022.
Given the disruption is currently impacting nearly 21 million barrels per day, outright short positions are incredibly risky. We believe derivative strategies that benefit from a large price swing, regardless of direction, are the most prudent approach. Options structures like long straddles for July expiration could capture a sharp move if talks break down or a resolution is suddenly found.
This situation is reminiscent of past geopolitical flare-ups, where prices can reverse violently on a single headline. The drone attacks in 2019 caused Brent to jump nearly 15% in a single session. Any trader ignoring the possibility of a $150 spike is ignoring recent history.
