Oil Price - June 21

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dan_s
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Joined: Fri Apr 23, 2010 8:22 am

Oil Price - June 21

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Oil prices hit a three-week high on Friday morning, extending recent gains as escalating tensions between the U.S. and Iran forced market participants to price in higher geopolitical risk premiums.

New York-traded West Texas Intermediate crude futures rose 45 cents, or 0.8%, to $57.52 a barrel by 7:56 AM ET (11:56 GMT), while Brent crude futures, the benchmark for oil prices outside the U.S. gained 84 cents, or 1.3%, to $65.29.

WTI oil was on track for a weekly gains of nearly 10%, while Brent was up 5.3% from a week ago.

U.S. President Donald Trump had authorized military strikes against Iran in response to the strike against a U.S. surveillance drone late Thursday, but called off the attack at the last minute, according to a New York Times report.

The incident underlined the risk of disruptions to global oil supplies coming out of the Persian Gulf, where six oil tankers have been damaged by explosions in the past six weeks.

“We continue to believe amid this growing tension in the Middle East, along with expectations of an OPEC+ deal extension, that oil prices will trend higher over the second half of the year,” ING commodities strategists Warren Patterson and Wenyu Yao said in a note. “A weaker U.S. dollar, with a more dovish Fed only adds further support,” they added.

OPEC members have postponed their scheduled review of the existing agreement on output restraint by a week to July 1. Non-members, most importantly Russia, will join the following day. Most analysts expect the aggregate output cut of 1.2 million barrels a day to be extended through the end of the year, although Saudi Arabian Energy Minister Khalid al-Falih has indicated that quotas for individual countries may need to be recalculated.
Dan Steffens
Energy Prospectus Group
dan_s
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Joined: Fri Apr 23, 2010 8:22 am

Re: Oil Price - June 21

Post by dan_s »

Reuters (London)

“There is no doubt that a severe disruption to the transit of oil through this vulnerable route would be extremely serious,” said consultancy FGE Energy in a note.

The demand-side outlook has also improved, with appetite for risk assets rising after the European and the U.S. central banks signaled possible rate cuts this week.

A weaker greenback tends to support oil prices because crude is usually priced in dollars.

Another macroeconomic factor supporting prices is the plan by Beijing and Washington to resume talks to resolve a trade tariff war that has hit economic growth prospects.

“Trade anxiety has died down, pushing energy prices higher as global growth will not be pressured by a prolonged tariff war,” said Alfonso Esparza, senior market analyst at OANDA.

Concern about slowing economic growth and a U.S.-China trade dispute had pulled oil lower in recent weeks. That came after Brent reached a 2019-high above $75 in April.
Dan Steffens
Energy Prospectus Group
dan_s
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Joined: Fri Apr 23, 2010 8:22 am

Re: Oil Price - June 21

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Late Thursday, the New York Times reported Trump had ordered attacks on Iran. But while aircraft were in the air en route to their targets, he called them back.

Trump tweeted Friday that he is in "no hurry" to attack Iran and that "sanctions are biting." He added that he approved strikes on three targets but decided to back down when he was told how many people would likely be killed.

Trump's Tweet: "On Monday they shot down an unmanned drone flying in International Waters. We were cocked & loaded to retaliate last night on 3 different sights when I asked, how many will die. 150 people, sir, was the answer from a General. 10 minutes before the strike I stopped it."

"President Trump's decision to deliver a U-turn on military strikes should not come to a surprise," Edward Moya, a market analyst with OANDA, wrote in his morning report. " In 2016, when he was the Republican presidential frontrunner and frequently campaigned that both sides of the aisle got caught up in too many costly, grinding wars."

Moya expects Trump to keep pressure on Tehran and believes that the risk of a military conflict has risen to 40% from 30%. He wrote that a U.S. airstrike could lead to a 10% spike in crude oil prices.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34463
Joined: Fri Apr 23, 2010 8:22 am

Re: Oil Price - June 21

Post by dan_s »

Technical Analysis about an hour after the market opened on Friday.
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Since the opening of today's trading day, WTI crude oil has been trading in a narrow range near the mark of 57.00 dollars per barrel. $57 is one of 3 key resistance levels (ЕМА200 on the weekly chart) passes through this mark. The next resistance level is $59.50 (Fibonacci level 50% of the upward correction to a fall from the highs of the last few year near the $76.80 mark to the support level near the $42.15 mark). $59.00 (ЕМА200 on the daily chart) is dominated by a long-term negative dynamic.

The current increase in the price of oil, which is observed this week, so far can be described as "corrective", provoked by a number of fundamental factors. This is the growth of geopolitical tensions in the Middle East, as well as the weakening of the U.S. dollar, occurring against the backdrop of the Fed's statements about the increased likelihood of monetary easing.

Last week two oil tankers were attacked in the Gulf of Oman, on Thursday, U.S. officials reported a missile attack on a desalination plant in Saudi Arabia, which was allegedly inflicted from Yemen. Later, the Islamic Revolutionary Corps announced that it had shot down an American reconnaissance drone over Iranian territory. The United States on Thursday announced preparations for a retaliatory strike on Iran.

Earlier, the Iranian authorities have repeatedly threatened to close the Strait of Hormuz, if U.S. sanctions against Iran are not lifted.

The increased risk of oil supply disruptions from the Middle East, coupled with a weaker dollar, led to a sharp rise in oil prices this week.

On Friday, oil market participants will follow the publication at 17:00 (GMT) of a weekly report on the number of active drilling rigs in the United States from the American oilfield services company Baker Hughes. If the report again indicates a decrease in the number of such installations (788 units at the moment), this may give an additional positive impetus to prices.

Nevertheless, it is premature to consider price growth above key resistance levels of 59.00 and 59.50.

Below these resistance levels, a long-term bearish trend prevails.

At the beginning of the European session, WTI crude oil is priced at $ 57.00 per barrel, below the important resistance levels of 59.50 (Fibonacci 50% of the upward correction to a fall from the highs of the past few years near 76.80 to the support near 42.15), 59.00 (ЕМА200 on the daily chart).

The signal for the resumption of sales will be the breakdown of support levels of 56.40 (ЕМА200 on 4-hour chart), 55.40 (Fibonacci 38.2%) with long-term goals located near the support level of 42.15 (Fibonacci 0% and lows of December 2018).

Support Levels: 56.40, 55.40, 54.10, 53.25, 50.30, 49.00, 42.15
Resistance Levels: 57.00, 59.00, 59.50
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MY TAKE: Oil prices will be headline driven, but supply/demand fundamentals are also supportive.
> What does Iran to next?
> G20 Summit: News of resumed trade talks between U.S. and China should lower fear of a recession.
> OPEC+ meeting on July 1.
> Annual spike in demand for transportation fuels should continue to draw down inventories. U.S. refiners should be ramping up to over 95% of capacity; sucking down crude oil inventories.
> Today, a close of WTI over $57.00 would be a bullish sign.
Dan Steffens
Energy Prospectus Group
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