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Weather and Strikes Dent Oil Prices: Investors On Edge

Oil prices

Global oil prices declined sharply after the tanker strike, which affected Brent and WTI. Market caution prevailed amid uncertainties.

In a surprising turn of events, global oil prices have experienced a notable pullback following a recent strike on an oil tanker. WTI (West Texas Intermediate) and Brent Crude have been affected, raising concerns among investors and industry experts.

Brent Crude Oil Retreats Post-Houthi Strike

Brent crude oil, which had been on a commendable recovery trajectory in early 2024, faced a setback after breaching the $83.50 mark. The UK oil trade softened, closing at around $82, a slight dip from the previous day’s close. Market sentiment is cautious as oil prices remain uncertain.

Over the weekend, Houthi rebels carried out a significant development by targeting vessels in the Red Sea, impacting oil or refined products for the first time. This event could disrupt oil flow through the Red Sea if other carriers take heed of the warning.

The market is currently testing the 200-day simple moving average as the immediate support level, with a potential further decline expected to test the 50 SMA around $78.70. The market is awaiting stability, and the MACD is yet to show a flip in momentum to the downside. Eyes are on upcoming US API data and EIA storage data for insights into the future direction of oil prices.

Weather and Strikes Dent Oil Prices: Investors On Edge

Oil Prices Boosted by Weather Conditions, GDP Surprise

Before the recent pullback, oil prices had enjoyed a series of increases due to extreme weather conditions. Icy weather impacted the Dakota and Texas oil fields, reducing crude output by approximately 1 million barrels per day in the week ending January 19th. Additionally, positive surprises in the US GDP for the fourth quarter, reporting 3.3% growth versus the expected 2%, contributed to a bullish wave of support for oil prices.

WTI Oil Faces Downward Trend

Meanwhile, WTI oil has breached the long-term trend marker to the downside, passing beneath the 200 SMA and the significant level of $77.40. The following potential support levels are the 50 SMA, which is around $73.63 and $72.50. Although the RSI had neared overbought levels, positive upside momentum remains intact.

This week, investors closely monitor major economic news and data, anticipating an update on monetary policy from the Federal Reserve. Additionally, leading up to Friday’s Non-Farm Payrolls (NFP) report, expectations for releasing US jobs data are high. The market remains on edge as uncertainties continue to influence the trajectory of oil prices in the coming days.

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