Oil Rises as Libya Halts Production at Largest Field & EU Mulls Russian Petroleum Ban
OIL PRICES KEY POINTS:
- Oil extends its winning streak and rises for a fourth consecutive session
- News that Libya has temporarily suspended production at its largest oilfield and reports that the European Union is drafting a proposal to ban Russian oil imports are the main bullish drivers.
- This article looks at the key technical levels for WTI to watch out for in the coming days.
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Oil prices are trading higher at the beginning of the week, in a context of low liquidity due to the bank holiday in many European countries for the celebration of Easter Monday. Against this backdrop, WTI futures extend their winning streak to four sessions, rising 0.2% to 107.30 dollars per barrel, the highest level since March 31.
Gains in the energy market are supported by several factors, including news that Libya has temporarily suspended production at its largest oilfield (Al-Fil) and declared "force majeure" due to anti-government protests at the site.
At the same time, reports that the European Union is slowly coalescing around imposing stronger sanctions on President Putin's governments over its invasion of Ukraine is bolstering bullish sentiment towards the commodity on Monday. For context, the New York Times reported that Brussels is drafting a proposal to ban oil imports from Russia in a phased manner to cut off a major source of revenue for Moscow that has helped finance the war in Ukraine. Details are still scarce, but media outlets indicate that European officials could begin discussing the measure after the final round of the French presidential election on April 24 to avoid influencing the outcome of the vote.
Although Russia has seen some of its fossil fuel exports being sidelined in recent weeks, the country remains the EU’s top oil supplier, providing the region with about a quarter of its oil and petroleum product needs, according to Eurostat. In figures, this represents about 2.2 million bpd of crude and about 1.2 million bpd of petroleum derivatives.
Meanwhile, the ongoing lockdowns in China in response to the rise in COVID-19 cases appear to be limiting the advance of both WTI and Brent. Although pandemic restrictions in the Asian country and the world's top oil importer may reduce energy needs over the coming days and weeks, the situation will improve, meaning that demand is only being deferred at this time. Once the health crisis improves and mobility patterns normalize, demand for crude oil should strengthen again, further supporting prices, as the market is expected to remain in a state of chronic deficit over the medium term.
WTI TECHNICAL ANALYSIS
Oil has staged a strong rebound in recent days following the pullback of the beginning of the month. In fact, gains have accelerated after prices broke above trendline resistance and the 50-day simple moving average earlier last week. With buyers entrenched in the driver’s seat, WTI could continue to drift higher and challenge the $111.60 level in the coming sessions, a key technical resistance created by the 50% Fibonacci retracement of the March/April correction. If bulls manage to clear this hurdle, the focus shifts up to the March 24 swing high near $116.64. On the flip side, if sellers return and spark a reversal, initial support appears at $101.35, but if this floor is breached, we can’t rule out a move towards trendline resistance near $95.
CRUDE OIL TECHNICAL CHART
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---Written by Diego Colman, Market Strategist & Contributor
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.