Mapping the Market: Oil's unfinished business could mean more pain ahead

US oil prices have tumbled nearly 40% since May, but technical analysis suggests a potential for another price surge due to two unfinished price gaps on the charts.

U.S. oil prices have tumbled ​nearly 40% at their extremes since May, ​bringing down the cost of ‌gasoline as well, ​but technical analysis suggests there is still a danger of another move higher. Click here for a more detailed chart.

The issue ‌is that oil charts are littered with unfinished business in the form of two price gaps, one from May 19-20 and another from June 12-15, according to data supplied by LSEG. Gaps are ‌unfilled spaces on price charts that occur in many different markets. Traders believe such gaps ‌must eventually be filled, meaning prices typically trade back through that range before settling on a new direction.

With oil currently trading around $70 a barrel, the nearest gap sits between the June 12 close of $84.88 and the June ⁠15 open ​of $81.40. Renewed friction between ⁠the U.S. and Iran this week pushed crude just above $76, edging closer to that zone but not yet closing ⁠it. The second, more distant gap lies between the May 19 close of $107.77 and the May 20 open ​of $104.12. Given it took roughly a month and a half for prices to fall ⁠from those levels, filling that gap could prove more costly for drivers if it happens.

There is no fixed timetable ⁠for ​when gaps get filled, and prices could simply continue lower instead. Still, the longer U.S.-Iran tensions persist and prices hover near current levels, the stronger the pull of these gaps ⁠may become. What the chart shows:

(Daily markets commentary from Reuters analysts on the signals financial charts are sending - and what they might mean.) (Robert Fullem is a Reuters market ‌analyst. The ‌views expressed are his own. Editing by Burton ​Frierson and Nia Williams)