Crude Oil Prices Tap 8-Month Highs on Middle East Tensions, Ahead of Inventories Report
Crude oil prices had a muted price action in yesterday’s trading. WTI crude oil CFDs traded within an 80-cent range before finishing the New York session at $61.16. This translated to a 7-cent loss for the day.
Risk Aversion Dominates Today’s Asian Session
Today’s Asian session, however, is proving to be more exciting. Crude oil prices rallied strongly to their eight-month highs as risk aversion dominated market sentiment. The biggest headline out of Asia was the US’ missile attack on Baghdad which killed an Iranian military officer. In response, Iran has warned against retaliation. Political tensions especially involving the Middle East tend to have a bullish effect on crude oil. This is because most of the world’s oil supplies are sourced from the region and tensions could disrupt oil production.
Crude Oil Prices Eye US Inventories Report
Later today, the US will release its data on crude oil inventories. At 4:00 pm GMT, the Energy Information Administration (EIA) is expected to announce that crude oil supplies held in storage by commercial firms fell by 3.1 million barrels in the week ending on December 27.
Following the surge in the price of crude oil in today’s Asian session, it would seem that markets have seemed to relax a little bit. Consequently, this could provide us with the opportunity to enter the rally on a pullback.
Looking at the hourly time frame, we can see that the 61.8% Fib level (when you draw the Fibonacci retracement tool from this morning’s low to its session highs) coincides nicely with a minor resistance level at $61.85. It also seems to align with the rising trend line when you connect the lows from December 6. Reversal candles around this area could mean that buyers are getting ready to push prices back up to their 8-month highs at $63.83. However, a bearish close below the trend line could mean that a bigger slide on crude oil prices is imminent. If this happens, you can keep an eye out for support at $60.08 where the commodity previously bottomed on December 20.
If risk aversion runs high in today’s trading though, we may not even see a pull back happen on oil. A bullish close above this morning’s highs could mean that crude oil prices are headed to their 2019 highs at $66.46.