Crude Jumps On Concurrent Supportive Factors

Oil prices jumped on Wednesday unwinding just over a week of losses. They trended higher over the day supported by a more dovish Fed Powell, increasing Middle East tensions, indicators signalling the market is oversold and industry data showing another US crude inventory drawdown. The softer US dollar also boosted $-denominated commodities (USD index -0.6%).

• WTI rose 5.2% to $78.64/bbl, close to the intraday high, breaking above the 20-day EMA, but has started today lower at $78.48. It trended higher through Wednesday breaking above several round number support levels. But the benchmark still ended July lower down 2.5% on the month. Initial resistance is at $83.58, July 5 high, and support $74.59, July 30 low.
• Brent increased 4.4% to $81.54 but was down 3.2% in July. It is still some way from the 50-day EMA of $82.44. Initial support is $77.95, July 30 low.
• Geopolitical tensions have risen with Israel killing the political leader of Hamas Haniyeh at his residence in Tehran. Iran’s Ayatollah Khamanei has called for a direct attack on Israel, according to the NY Times, while Israeli PM Netanyahu has cautioned that there are “challenging days ahead”. Iran is the 7^th largest global oil producer and crude has risen strongly when its flows to the world look at risk.
• EIA reported US crude inventories fell 3.44mn barrels last week, the fifth consecutive drawdown worth 27.6mn barrels. Gasoline fell 3.7mn while distillate rose 1.5mn. Refinery utilisation fell for the third week to 90.1% from 91.6%.
• The Fed’s forward guidance was unchanged but then Chair Powell said that easing “could be on the table as soon as September”. A 25bp cut is now more than priced in for that meeting.

Source: MNI - Market News/Refinitiv