Middle Eastern Tensions & Dovish Fed Lifts Oil 3%
Fiona Cincotta June 20, 2019 6:43 AM
Today’s gains have put oil up over 5% so far this week and 3.8% up on the month to date. Following May’s decline of 16% could oil have further to climb?
Reports of a US military drone being shot down by Iranian missile in international air space over the Strait of Hormuz demonstrates the elevated level of tensions around that key oil route. This comes following suspected Iranian attacks on two tankers earlier in the month amid ongoing US sanctions on Iran.
Whilst tensions in the middle east have caused the spike in oil prices today and earlier in the month, there are several other factors supporting oil.
US -Sino Trade & the Fed
Signs that the US and China, the two largest consumers of oil, are resuming talks lowers the probability of a prolonged trade war hitting demand. Meanwhile the Fed preparing to offer stimulus to the US economy has not only weakened the dollar making oil cheaper for holders of other currencies but would greatly help the demand side of the oil equation too.
After weeks of wrangling, OPEC have finally agreed on a date to meet; 1st July with OPEC plus group meeting July 2nd. Saudi Arabia have bee making it clear that they are keen to keep the output production cuts of 1.2 million barrels a day in place, possibly even limiting production further. Momentum for an agreement seems to be building amid growing reports from energy ministers that an extension is “logical and reasonable”.
US Crude stocks declined by more than expected last week, a draw of 3.3 million barrels, well below the 1.1 million expected after stockpiles had swelled to almost 2 year highs.
For now, oil traders will remain glued to developments in the middle east for signs off further escalation of tensions. US macro data will also be closely watched for its impact on the dollar.
Crude oil levels to watch:
Crude has broken out of the channel which has been trading in this month. Crude bulls will be eyeing resistance at $56.20 prior to $57.15 on its way to $59.00. On the downside, resistance turned support $54.85 offers near term support. A break below this level would see oil re-enter its familiar channel. The next support level is seen at $53.30.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.