At the end of last week, Brent and WTI crude hit highs last seen around two months ago. Earlier in the week, both contracts broke above resistance levels of $80 and $75 respectively. These gains came after news of two attacks by Ukraine on Russian energy infrastructure. The first target was the Russian Ust-Luga oil terminal and the second was a Russian oil refinery owned by Rosneft. In addition, data from the US Energy Information Administration (EIA) showed a bigger-than-expected draw in crude inventories. On top of this, prices got a boost from news of a 0.5% cut in China’s Reserve Requirement Ratio for banks, starting in February, and reports of a $280 billion stimulus programme to help steady the Chinese stock market. Oil was little-changed in early trade this morning, despite an alleged Iranian-backed drone attack in northeastern Jordan which resulted in the deaths of three US military personnel. This followed Friday’s missile attack by Iranian-backed Houthis on a tanker in the Red Sea. But ahead of today’s US open, oil drifted lower.
The daily chart of the oil ETF shows how quickly crude moved to the upside last week, once it had broken above resistance. It has probably got a bit ahead of itself, so a pull-back would help to weed out the speculative longs. If it can hold $75 as support on all sell-offs, then it may start to build a base from which it can head higher. The MACD is now positive and indicates that sentiment is improving too. But it’s very early days, and this recent strength could turn out to be a head fake.
The daily chart of the oil ETF shows how quickly crude moved to the upside last week, once it had broken above resistance. It has probably got a bit ahead of itself, so a pull-back would help to weed out the speculative longs. If it can hold $75 as support on all sell-offs, then it may start to build a base from which it can head higher. The MACD is now positive and indicates that sentiment is improving too. But it’s very early days, and this recent strength could turn out to be a head fake.