Jump to content

Crude Oil Soars to New Heights Despite a Strong US Dollar. Where To For WTI?


MongiIG

Recommended Posts

CRUDE OIL, US DOLLAR, RUSSIA, UKRAINE, OPEC+, WTI - TALKING POINTS

  • Crude oil prices run higher as supply and demand factors face off
  • Supply issues remain a problem as OPEC+ are unable to deliver
  • Energy demand increases loom as the northern winter hits. Will WTI rise?
Oil climbs as dollar slumps; gains capped by pandemic surge | Reuters

Crude oil has continued on from last week’s gain in Asian trade on Monday. With northern hemisphere storms brewing, geopolitical concerns, supply constraints and option hedging all in play, the energy commodity appears to have little choice for now.

Tensions continue to rise around the Ukraine-Russian border as Moscow orders more troops to the area. A conflict in this region could undermine European energy sources and has added to global oil supply concerns.

The Pentagon has de-classified a number of military intelligence reports showing the build-up of weaponry. They have also pointed toward a mis-information campaign within the Ukraine that they say has been orchestrated by Russia.

A number of analysts and commentators have made calls for oil prices over $100 bbl in the last few weeks. With OPEC+ unable to deliver in full on their output increases of late, their forecasts are drawing near.

On Wednesday, OPEC+ are due to discuss output targets at their scheduled meeting.

Above $90 bbl may see option underwriters start to hedge their exposure. According to data from Bloomberg, the number of calls that have been written far outweigh the number of puts above $90 bbl.

This would lead to buying of oil as the price accelerates north. Once the price has moved up through various thresholds and the options have been hedged, if the price is to fall, then the hedging of these options will see those same buyers turn around and start selling. This could add further to price volatility.

 

CRUDE OIL TECHNICAL ANALYSIS

WTI crude oil traded at its highest level since October 2014 on Friday.

The move up has nudged against the 21-day simple moving average (SMA) based Bollinger Band but it has been unable to close outside the upper band. This could indicate that the market is comfortable with the rate of change in the rally.

On the topside, resistance may be offered at the recent previous high of 88.84.

The 10-day simple moving average (SMA)is currently just above a prior pivot point at 85.90 and might provide support.

Previous lows and pivot points of 81.90, 79.33, 77.44, 74.96, 74.76 and 73.34 could also provide support.

CRUDE OIL CHART

Chart created in TradingView

 

 

Written by Daniel McCarthy, Strategist for DailyFX.com. 31st 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...