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Middle East Impact
Oil prices have slipped lower through the middle of the week following a better show of demand in recent days. Crude futures were seen spiking to just below 72 yesterday, having rebounded 5.5% off last week’s lows. Uncertainty around the conflict in the Middle East remains a key driver of price action with Israel’s military action in Lebanon ongoing and the risk of direct conflict with Iran still elevated. Israel is reportedly nearly ready to comments retaliatory attacks against Iran with fears that energy infrastructure could end up being damaged. If this is the case, oil prices are vulnerable to fresh upside as traders eye supply risks.
USD Impact
While risks linked to supply disruption in the Middle East are having an upside impact on oil prices, strength in the US Dollar is capping upside for now. The US Dollar continues to push higher this week as US elections uncertainty, a less dovish Fed view and safe haven inflows combine to drive support into the greenback.
EIA Data
Looking ahead this week, traders will be watching the latest EIA inventories data today. Stockpiles are expected to have risen around 1million barrels last week, up from the 2.2 million barrel deficit seen the prior week. If confirmed, this should keep oil strength capped for now, though the Middle East remains the key driver to monitor near-term and pries could still blow higher on any negative news flow.
Technical Views
Crude Oil
The sell off in crude has stalled for now into a test of the bear channel lows and the 67.45 level. Price is now attempting to get back above 72.61. If seen, focus will shift to a further recovery towards 77.64. Failure here, however, keeps the downside view intact with 63.83 seen as the next bear target. In the Signal Centre today, we have a sell limit at 73.48, suggesting a preference to fade the recovery.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.