Oil benchmarks hit fresh 3.5 year highs

Brent crude Oil hit highest since November 2014 at $77.75 per barrel.
WTI crude oil hit highest since November 2014 at $71.75 per barrel.

Omkar Godbole FXStreet Contributor

Oil prices continue to set fresh multi-year highs as investors digest the possibility of fresh US sanctions against Iran and faster tightening of the oil markets.

As of writing, Brent is changing hands at $77.70/barrel and WTI is trading at $71.66/barrel.

It is widely believed that Iran's exports to Asia and Europe would drop if sanctions are reimposed, thus leading to tighter market conditions. Saudi Arabia has expressed readiness to increase production to make up for any shortages resulting from the Iran deal fallout, although that is not having any calming effect on oil markets.

Further, the drop in the US oil inventories, as reported by the Energy Information Administration, may have also played a role in pushing oil prices to fresh 3.5-year high. US oil inventories dropped by 2.2 million barrels in the week to May 4 and gasoline inventories also fell by 2.2 million barrels.

WTI Technical Outlook

Wang Tao, a Reuters market analyst for commodities and energy technicals, expects oil to rise into $72.29-$73.53 range.

Key points (Source: Reuters)

"On the daily chart, oil has cleared a key resistance at $71.24"

"The contract is climbing towards the range of $73.28-$75.50. However, the upside may not be limited to the range, given that the bearish divergence on the RSI almost becomes invalid."

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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