Oil Extends Rally Amid Tight Supply Concern

Fundamental Analysis

* Supply Squeeze: Oil prices extend its rally towards 4.5 month high as energy markets show growing concern over the ongoing decline in crude oil supplies expected to persist in the near future. Despite countries outside of the Organization of the Petroleum Exporting Countries (OPEC), notably the US, are pumping record amounts of oil, there is a widespread anticipation in crude oil markets of a medium to long-term supply constraint, leading to an increase in barrel prices. Data from Saudi Arabia showed crude exports from OPEC’s biggest producer fell for a second straight month in January. In Russia, Ukrainian attacks put a key fuel refinery out of commission.

Technical Analysis

* Technical Breakout: The crude oil price was traded higher following prior rebound from the support level 80.80. MACD which illustrate ongoing bullish momentum suggest the pair to extend to further extend its gains.

* Resistance And Targets: If the bullish momentum persists, the price is likely to head towards the resistance level 83.0. A breakout above the level would potentially lead to further upward movement. Conversely, if the price fails to surpass the level 83.0, it may indicate a technical correction and head back towards the support level of 80.80.

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Potential Risks

Moving forwards, while oil price currently buoyed by supply concerns, focus now directed towards the conclusion of a two-day Federal Reserve meeting scheduled for Wednesday, where it is widely anticipated that the central bank will maintain interest rates at their current levels. The robust performance of the U.S. economy is positive for fuel demand in the largest fuel-consuming nation globally. However, the possibility of sustained higher interest rates later in 2024 could potentially dampen demand.

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Monitoring

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Disclaimer: Trading derivatives involves high risks, and market conditions can change rapidly. The content is for informational purposes only and should not be considered as financial advice. Traders should conduct their own research and consider risk management strategies.