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Navigating Oil Markets Amid Geopolitical Stir


Navigating Oil Markets Amid Geopolitical Stir

In the world of oil markets, where every shift in geopolitics sends ripples, our recent journey has been nothing short of a rollercoaster. Join us as we unravel the key events and their impact on the ever-evolving landscape.

West Texas Intermediate (WTI) crude oil futures took center stage, waltzing within a modestly tight range. An impressive display of resilience, the market not only withstood various pressures but also managed to secure a modest gain.

What's on the Radar?

  • Middle East Tensions: Recent developments, including strikes between Pakistan and Iran, added a layer of tension. While global oil supplies haven't been significantly disrupted, increased shipping costs hint at potential market implications.

  • US Production: From North Dakota's output reductions to the U.S. hitting a production peak of 13.3 million barrels per day, the domestic oil industry faces variable challenges, showcasing the industry's dynamic nature.

  • EIA Insights: The Energy Information Administration (EIA) reported unexpected drops in U.S. crude inventories, reflecting robust refinery demand. However, increased gasoline and distillate inventories suggest a nuanced outlook for the sector.

  • OPEC vs. IEA: Differing forecasts between OPEC and the International Energy Agency (IEA) on global oil demand growth hint at uncertainties in the long-term consumption trend. OPEC remains optimistic, while the IEA takes a more cautious stance.

  • China's Role: As a major player, China's economic slowdown raises questions about future oil consumption. However, proactive crude oil purchases by Chinese refiners signal a hopeful anticipation of increased demand later in 2024.

  • Fed, Interest Rates, US Dollar: The intricate dance between the U.S. dollar, Federal Reserve policies, and oil prices remains a key factor influencing market dynamics.

WTI's Choreography on the Charts

The Dance of Trends:

  • The main trend leans downward since mid-November, with potential targets at $63.00.

  • Minor trend also tilts down, awaiting a potential shift.

  • Upside momentum could be sparked by breaching $86.68, reaffirming an uptrend.

Retracement Zones:

  • Major support resides at $64.52 to $58.46, a long-term value zone.

  • Additional support at $65.83 to $60.09.

  • Potential upside target at $76.57 to $79.77.

Reversal Bottom Pattern:

  • A closing price reversal bottom on the weekly chart since mid-December underpins prices.

What Lies Ahead?

Key Factors:

  • Middle East Tensions: Potential disruptions in key transit points may impact global supply.

  • US Production Changes: Variable production, especially in North Dakota, adds supply-side uncertainty.

  • Global Demand Shifts: China's economic slowdown and its impact on oil demand remain in focus.

  • Economic and Policy Factors: Federal Reserve decisions and U.S. dollar strength could sway oil demand.

Energy ahead promises a market sensitive to geopolitical events, production shifts, and major economic decisions.

As traders brace for potential volatility, the charts hint at a potential breakout level, signaling both a countertrend rally and a trigger for downside acceleration. 

To your trading success,

Anthony Speciale

Big Energy Profits

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