After plummeting 2.94% last week, WTI Crude Oil Futures (NYMEX: CL) surged over 1.8% today, exceeding $72 per barrel on anxieties surrounding escalating Middle East tensions. The weekend witnessed US Navy helicopters destroying Houthi boats aiming to board a commercial vessel in the Red Sea, fuelling concerns about potential supply disruptions. Adding fuel to the fire, an Iranian destroyer’s reported deployment to the Red Sea further amplified regional unease.
While geopolitical jitters propel prices higher, worries about rising global supply, primarily from non-OPEC producers like Brazil and Guyana, and persistent demand uncertainties act as counterweights. US crude production hitting a record 13.3 million barrels per day further underscores this supply glut.
Technical
The 4-hour chart shows that the futures are currently at $72.64 per barrel (BLL), with the price action trading over 1.8% higher today. WTI’s recent break above the 100-SMA (orange) suggests a shift in momentum, despite remaining below the 20-SMA (green) and 50-SMA (blue), with the 50-SMA’s recent breach of the 20-SMA offering bullish confirmation.
A sustained push higher could offer short-term trading opportunities towards the initial resistance at $73.71/BLL. A break above the $73.71/BLL level would likely bring the $74.59/BLL resistance level within the bulls reach in the short term.
Failure to maintain the current momentum could lead to a retracement towards the support level at the $71.69/BLL price level should the push higher falter. A break below the initial support could confirm the bearish momentum, likely bringing the $70.75/BLL support level into play.
Summary
WTI’s vigorous rally on the first day of 2024 sets the stage for an intriguing battle between geopolitical anxieties and technical indicators. While the Red Sea tensions provide immediate fuel for the bulls, oversupply concerns and demand uncertainties remain lurking in the shadows.
Sources:TradingView, Trading Economics, Reuters, Dow Jones Newswire.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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