Geopolitical Risks Driving Crude
Crude oil prices are looking a little softer at the start of the week, with the futures market in the red through early European trading on Monday. Last week, prices were seen rallying sharply as traders reacted to news of a worrying intensification of the Russia/Ukraine war. Ukraine’s use of US and UK missiles against Russia and Russia subsequent threat of a nuclear retaliation, and use of an ICBM against Ukraine, present a concerning escalation of the conflict. Growing fears of damage to energy infrastructure and consequent supply disruption are likely to keep oil prices underpinned near-term, limiting the current pullback.
Russia/Ukraine
Traders will be monitoring incoming headlines regarding the war this week. Any further worrying rhetoric from Russia or an escalation from either side, is likely to see oil prices spike higher. Russia has recently lowered the barrier for use of nuclear arms and the firing of an ICBM last week means that the West can no longer afford to think Putin is bluffing.
Fed and USD
Alongside this, traders will also be keeping an eye on USD flows. Traders have scaled back their Fed easing expectations recently with projections for a December cut now roughly around the 50% market from above 80% a month ago. Incoming US data this week and the FOMC minutes will be closely watched. Any fresh USD upside is likely to have a dampening effect on oil prices. However, given the level of uncertainty around geo-political risks, USD is unlikely to be the main driver for oil unless see any significant surprises this week.
Technical Views
Crude
The rally last week saw the market breaking above the contracting triangle pattern, suggesting room for a fresh push higher. 72.61 will now be the key focus point for bulls, with a break there opening the way for a run up to 77.64 next.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.