Jump to content

Crude Oil Prices Surge to 7-Year High on Tight Demand, Iraq Pipeline Blast


Recommended Posts


WTI crude oil prices extended higher to $87 bbl, a level not seen since October 2014. A key oil pipeline from Iraq to Turkey was hit by an explosion, adding pressure to an already tight market.


  • Crude oil prices surged to the highest level seen since 2014 amid tight market conditions
  • Iraq-Turkey pipeline blast boosted prices as investors mulled geopolitical risks
  • WTI is trending higher within an “Ascending Channel”, underscoring a upward trajectory
Crude Oil Prices Surge to 7-Year High on Tight Demand, Iraq Pipeline Blast

Crude oil prices extended higher during Wednesday’s APAC mid-day session, trading at the highest level seen since October 2014. WTI is heading towards $87 bbl, and Brent is trading at around $88.8 bbl. Oil prices have been well-supported by rising physical demand, with Asian importers paying higher premiums for spot cargoes. Earlier this week, Japan and China released upbeat macro data, underscoring resilience of the world’s second- and third-largest economies against the headwind of the Omicron variant. China and Japan are the world’s first and fifth largest oil importers respectively.

A key pipeline that transports oil from Iraq to Europe through Turkey’s Mediterranean port of Ceyhan was hit by a blast today. The pipeline carries nearly half a million barrels of oil per day, so its outage has had an outsized impact on prices. Although the shutdown appears likely to be short-lived after fires are brought under control, traders remain jittery about geopolitical tensions in the region and their impact on oil supply.

Market participants remain bullish on oil. Goldman Sachs forecasted $100 bbl for Brent in the third quarter due to strong demand and tight supply. OPEC also foresees robust growth in world oil demand in 2022, predicting the oil market would be “well-supported” throughout the year. If their forecasts are correct, rising energy and raw material prices may prompt the Fed and other central banks to raise interest rates faster and sooner to rein in inflation.

In the US, crude inventories have been falling for seven weeks in a row, underscoring strong demand for energy (chart below). Investors will eye the next release on Thursday for more clues.

WTI Crude Oil Price vs. DoE Weekly Change in Crude Inventory

Crude Oil Prices Surge to 7-Year High on Tight Demand, Iraq Pipeline Blast

Source: Bloomberg, DailyFX

Technically, WTI is trending higher within a “Ascending Channel as highlighted on the chart below. The upper and lower bound of the channel may be viewed as immediate resistance and support levels respectively. The trio of short-, medium- and longer-term SMA lines are about to form a “Golden Cross”, underscoring a upward trajectory. The MACD indicator is trending higher, suggesting that bullish momentum is still dominating.

WTI Crude Oil Price  Daily Chart

Crude Oil Prices Surge to 7-Year High on Tight Demand, Iraq Pipeline Blast


Written by Margaret Yang, Strategist for DailyFX.com. 19th Jan 2022.

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • Posts

    • Sainsburys full year earnings and Unilever’s first quarter trading update both say the same thing, UK consumers are in for higher prices. The war in Ukraine, supply chain issues and the effects of ongoing Covid all to blame.      
    • US Dollar (DXY) Daily Price and Analysis US Q1 GDP may stall the greenback’s advance. A 20-year high nears for the US dollar. The multi-month US dollar rally continues with the greenback printing a fresh high today ahead of the first look at US Q1 GDP at 12.30 GMT. The US dollar basket (DXY) has been boosted by renewed weakness in the Euro and the Japanese Yen, as investors move from lower-yielding to higher-yielding currencies, while safe-haven flows continue to benefit the greenback. The US growth release later in the session is expected to show a sharp slowdown from the robust Q4 figure of 6.9%. The markets are currently pricing in growth of just 1% for the first three months of this year, with the slowdown mainly due to a reduction in inventory accrual over the quarter. This release is unlikely to move the greenback, unless there is a large miss or beat, as the Fed believe that 2022 US growth will be robust enough to let them tighten monetary policy sharply without damaging the economy. The latest US Core PCE data – the Fed’s preferred inflation reading – is released on Friday and this may have more effect on the US dollar than today’s GDP data. For all market moving economic data and events, see the DailyFX Calendar. The ongoing US dollar rally has been aided by weakness across a range of G7 currencies including the Euro, the Japanese Yen, and the British Pound. The Euro continues to battle with lowly growth expectations, exacerbated by energy concerns, the British Pound is mired by weak economic data, while the Japanese Yen is in freefall as the BoJ continues with its ultra-loose monetary policy.   The US dollar continues to press higher and looks set to break above 103.96, the March 2020 high. Above here the US dollar would be back at levels last seen nearly two decades ago. The March resistance will likely hold in the short-term, especially with month-end portfolio rebalancing at the end of the week, but US dollar strength is set to continue in the months ahead. USDOLLAR (DXY) WEEKLY PRICE CHART – APRIL 28, 2022 {{THE_FUNDAMENTALS_OF_BREAKOUT_TRADING}} What is your view on the US Dollar – bullish or bearish?   Apr 28, 2022 | DailyFX Nick Cawley, Strategist
    • While Tesla has nothing directly to do with Elon Musk buying Twitter - TSLA stock closed down 12% on news that Musk may have to sell stock and use other holdings to stand against the loan to finalise the purchase of the social media giant.        
  • Create New...