Crude’s overnight spike in gave bulls much to cheer about, but it remains to be seen if the geopolitical drivers can sustain the rally.
Crude prices had a wellhead blowout overnight, erupting higher as a combination of rumours and geopolitical news created rich pickings for oil bulls. WTI climbed 1.75% on the day to close at 50.25, but it was coat tailing Brent which was the star of the show, rising 2.10% to close at 57.15.
Alleged reports that Russia and Saudi Arabia have agreed to extend the production cuts until the end of 2018, nicely dovetailing with the Saudi King’s visit to Russia, gave oil it’s initial boost. Worries that the U.S. may reimpose sanctions on Iran and the announcement that Turkey, Iran an Iran had agreed to curtail Kurdish oil exports, currently 550,000 barrels a day, did the rest. The question will be into the weekend, whether geopolitics alone will be enough to sustain yesterday’s jump.
Brent crude is slightly lower at 57.10 in Asia, and the overnight high at 57.40 is the initial resistance followed by 57.60. On the downside, Brent has held the lower end of the longer term breakout zone at 55.50 in a pleasing technical development. Support then appears below there at 54.90.
WTI trades 30 cents lower at 50.30 with some profit taking around following the overnight rally. Resistance at 51.00 will be challenging initially closely followed by the 51.50 area. Support lies at 49.50 followed by the 200-day moving average at 49.25 with a break of the latter implying the rally was fool’s gold and not black gold.