Oil Price - March 22

dan_s · Post by **dan_s** » Thu Mar 22, 2018 9:13 am

Brent selloff in London carries over to WTI.

By Helen Rush at Forex ~9AM ET
Crude oil prices extended a spectacular rally yesterday and touched early February highs around $69.50. But the major psychological resistance of $70 has scared the bulls, and Brent faded its earlier spike on Thursday, trading almost 1.5% lower on the day.

The bullish move was recently fuelled by rising geopolitical tensions around Iran, increasing the risk of reduction in oil export from one of the largest OPEC producers. Against this background, traders started to eagerly price in a faster global market rebalancing after the expected introduction of new US sanctions against Tehran. The US inventory data gave the additional impetus to prices as the EIA reported a decline in crude oil inventories of 2.6 million barrels for the week to March 16.

However, the rally was to aggressive and made Brent a bit overbought in the short-term charts. Besides, prices have reached very attractive levels for profit taking. So, the market participants decided to use this opportunity, which has triggered a downside correction. The barrel is now approaching the $68 mark, and to prevent a more aggressive retreat, the asset needs to keep above this area for now. The immediate risk for prices is the potential fresh wave of risk aversion on Trump’s announcement of new import tariffs against China.
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MY TAKE;
When the oil price spikes, hedge funds with long positions tighten up their stop loss orders. When the selling starts it can cause oversized moves down, which sets up the next move up. It would be much better for oil to go up ten cents day after day then to go up $1.00 one day and down $0.80 the next. Regardless of what happens today, the physical oil market is heading to an extended period of demand exceeding supply.