WTI struggles to keep $60

WTI struggles to keep $60.00 despite fresh risks over US-Iran terms

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  • WTI bulls catch a breather around 13-month top.
  • US service member injured in attack on Erbil, Iraq.
  • Risk-on, US dollar weakness and fears of supply outage also favor bulls.
  • China holidays to restrict the moves ahead of the US return, risk catalysts eyed.

WTI eases from yearly top to $60.05 by the end of Monday’s settlement period. In doing so, the energy benchmark ignores the latest headlines concerning the attack over the US base in Northern Iraq.

In addition to the death of one US service member, reports of injuries could be found for one US service member and five civilian contractors. The crew was a part of the US-led coalition forces in Erbil, Iraq. As a result, speculations grow over Iran’s possible hand behind the move and the anticipated tussles between Washington and Tehran, which in turn will add to the oil’s rally amid fears of supply disruption.

Also portraying the lack of inflow could be from Permian Basin as Bloomberg quotes, “The largest oil refineries in North America are shutting down because of Arctic conditions that have disrupted power, water and fuel supplies across Texas.” It should be noted that Saudi Arabia’s voluntary output cut remains active during February and March, which in turn offers extra strength to the oil prices.

In addition to the odds favoring the reduction in oil supplies, hopes of increasing demand also recently propelled the energy benchmark. The same could be traced from the recent recovery in the coronavirus (COVID-19) conditions as well as welcome developments on the vaccine front. Further, chatters concerning the US covid relief package offer additional strength to the demand outlook.

Looking forward, China’s offer may offer fewer moves to the black gold during the Asian session. However, the American traders’ return from the extended weekend may favor the optimists. In doing so, risk catalysts will be the key and hence move of the S&P 500 Futures, as well as Asian stocks and the US 10-year Treasury yields, will be the key to watch.

Technical analysis

Other than the $60.00 threshold, the late January 2020 peak surrounding $59.30 and the two-week-old support line near $57.90 also test the WTI sellers. Meanwhile, September 2019 high near $63.15 can please the oil buyers beyond the latest top surrounding $60.80.

Credit: FX Street

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