Crude’s Rally, Black Gold or Fool’s Gold?

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.

Brent Daily

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.

WTI Daily

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Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was OANDA’s Senior Market Analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV and Channel News Asia as well as in leading print publications such as The New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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