|

WTI extends gains to $45.00 mark, highest levels since 6 March

  • WTI surged nearly $2 to reach $45 for the first time since early March on Tuesday.
  • A confluence of risk on factors, including decreased US political uncertainty and vaccine, strong data and OPEC+ optimism are all helping.

WTI trades with gains of nearly $2 or 4.5% on Tuesday, taking the American benchmark for sweet light crude oil to briefly above the $45.00 mark, its highest levels since 6 March, prior to when Saudi Arabia initiated the price war that eventually resulted in the collapse of the front-month WTI futures to record lows of lower than -$30 per barrel.

Confluence of positives lifts crude to eight-month highs

Crude oil prices surged on Tuesday, seemingly buoyed by a significant uptick in the market’s broader appetite for risk on a few bullish macro factors;

The Trump Administration allowed the General Services Administration to inform the incoming Biden Administration that the formal transition process can begin. Though Trump is yet to admit defeat and is still pursuing his countless lawsuits and claiming fraud, this seems to be the first step to him admitting defeat, which gives markets one thing less to worry about.

Moreover, stock and commodity alike all seem to also still be deriving support amid the afterglow of Monday’s positive vaccine update from AstraZeneca, as well as stronger than expected US data and the news that the US Treasury Department is set to be in “safe hands” with former Fed Chairman Janet Yellen in charge.

More specifically for the crude oil complex; the notion that despite recent positive news on the vaccine front, OPEC+ members have yet to demonstrate a lower appetite for production cuts is also supportive.

Indeed, the greatest threat to the crude oil markets much hoped for at least three-month output cut extension from the cartel is likely to be recent crude oil price upside itself; countries might want to capitalise on higher prices by upping output at an earlier date (though this is just speculation).

Meanwhile, although not garnering a significant amount of attention on Tuesday, news of further risk to Saudi supply has also likely helped buoy crude oil prices today; Yemen’s Houthi rebel group attacked a Saudi Aramco distribution station in the Saudi Arabian city of Jeddah and a fire reportedly broke out. However, Aramco's said its supply of fuel to customers was not affected.

WTI bulls to eye a retest of big support at 26 August high

WTI crude oil prices cleared the 26 August high at $43.78 earlier on during Tuesday’s European session, opening the door to a sustained move to the upside, given a lack of any significant areas of resistance ahead of $49.00.

However, some profit-taking in wake of Tuesday’s outsized gains is likely warranted and could push WTI back towards a retest of the 26 August high. Here bulls are likely to be eager to buy the dip, so it ought to provide formidable resistance, but if the level does go, the 11 November high at $43.00 will be in focus.

WTI daily chart

wti daily

Author

Joel Frank

Joel Frank

Independent Analyst

Joel Frank is an economics graduate from the University of Birmingham and has worked as a full-time financial market analyst since 2018, specialising in the coverage of how developments in the global economy impact financial asset

More from Joel Frank
Share:

Editor's Picks

GBP/USD surges to multi-day peaks past 1.3250

GBP/USD leaves behind Friday’s small pullback and advances past 1.3250 level, or five-day highs, on Monday. Cable’s upside follows extra losses in the Greenback, while traders continue to assess the geopolitical front and upcoming key events.

EUR/USD softens to near 1.1400 as ECB tightening bets fade

The EUR/USD pair trades with mild losses around 1.1415 during the early Asian session on Tuesday. The Euro softens against the US Dollar as traders reduce their bets on the European Central Bank rate hikes this year.

Gold tumbles 1.5% to fresh seven-month lows below $3,950

Gold remains under strong selling pressure for the second straight day early Tuesday, refreshing seven-month lows below $3,950. Renewed US-Iran hostilities over the weekend cast doubts over the sustainability of the peace deal. This, along with elevated expectations for Fed rate hikes, offers some support to the US Dollar and undermines the bullion.

Bitcoin stalls at $60K as buyer conviction fades, Strategy authorizes BTC sales

Bitcoin is trading around the $60,000 level on Monday after a sharp decline last week. With the top crypto struggling to recover, analysts suggest the market remains firmly in defensive territory as investors await stronger signs of demand.

Just like Fed, is BoJ’s independence under threat?

When talking about central bank independence, most of the focus has been on Donald Trump’s pressure on the Federal Reserve. But a similar story, a quieter one for now, seems to be happening on the other side of the Pacific: Japan’s government may be testing the Bank of Japan’s independence.

Kevin Warsh isn't expected to say much in Sintra: That's exactly why markets will listen

Financial markets could find an important catalyst in the enchanting, fairytale-like landscape of Sintra this week. The ECB Forum will, as it does every year, gather the crème de la crème of central banks. The new boss at the Fed, who has clearly said that the Fed should stop explaining everything, will need to talk – and traders should listen.