Crude Oil Prices Surge to 7-Year High on Tight Demand, Iraq Pipeline Blast
WTI crude oil prices extended higher to $87 bbl, a level not seen since October 2014. A key oil pipeline from Iraq to Turkey was hit by an explosion, adding pressure to an already tight market.
CRUDE OIL PRICE OUTLOOK:
- Crude oil prices surged to the highest level seen since 2014 amid tight market conditions
- Iraq-Turkey pipeline blast boosted prices as investors mulled geopolitical risks
- WTI is trending higher within an “Ascending Channel”, underscoring a upward trajectory
Crude oil prices extended higher during Wednesday’s APAC mid-day session, trading at the highest level seen since October 2014. WTI is heading towards $87 bbl, and Brent is trading at around $88.8 bbl. Oil prices have been well-supported by rising physical demand, with Asian importers paying higher premiums for spot cargoes. Earlier this week, Japan and China released upbeat macro data, underscoring resilience of the world’s second- and third-largest economies against the headwind of the Omicron variant. China and Japan are the world’s first and fifth largest oil importers respectively.
A key pipeline that transports oil from Iraq to Europe through Turkey’s Mediterranean port of Ceyhan was hit by a blast today. The pipeline carries nearly half a million barrels of oil per day, so its outage has had an outsized impact on prices. Although the shutdown appears likely to be short-lived after fires are brought under control, traders remain jittery about geopolitical tensions in the region and their impact on oil supply.
Market participants remain bullish on oil. Goldman Sachs forecasted $100 bbl for Brent in the third quarter due to strong demand and tight supply. OPEC also foresees robust growth in world oil demand in 2022, predicting the oil market would be “well-supported” throughout the year. If their forecasts are correct, rising energy and raw material prices may prompt the Fed and other central banks to raise interest rates faster and sooner to rein in inflation.
In the US, crude inventories have been falling for seven weeks in a row, underscoring strong demand for energy (chart below). Investors will eye the next release on Thursday for more clues.
WTI Crude Oil Price vs. DoE Weekly Change in Crude Inventory
Source: Bloomberg, DailyFX
Technically, WTI is trending higher within a “Ascending Channel” as highlighted on the chart below. The upper and lower bound of the channel may be viewed as immediate resistance and support levels respectively. The trio of short-, medium- and longer-term SMA lines are about to form a “Golden Cross”, underscoring a upward trajectory. The MACD indicator is trending higher, suggesting that bullish momentum is still dominating.
WTI Crude Oil Price – Daily Chart
--- Written by Margaret Yang, Strategist for DailyFX.com
To contact Margaret, use the Comments section below or @margaretyjy on Twitter
