Oil sinks as feared Israeli ground offensive is delayed again

• Oil (WTI) trades near $87.50 and drops lower as markets see tensions ease in the Middle East.
• The US Dollar closed in the red last week and is facing more selling pressure this Monday. 
• Oil could sink lower if the Israeli ground offensive could be completely cancelled due to international pressure. 

Oil prices are sinking lower as several world leaders have scrambled to make an appearance in Tel Aviv to demand a more humane and humanitarian approach for the retaliation against Hamas. Little by little humanitarian help is being allowed on the field in Gaza, though several request have been issued by state departments from foreign countries, calling their citizens to evacuate the area in light of a possible massive ground offensive. As the days pass and the ground offensive is being delayed, markets are pricing out the risk premium as the probability of the offensive actually happening, will diminish. 

Meanwhile, The US Dollar (USD) is facing headwinds as it looks that  its months-long rally has officially halted. Traders are bracing for two big data points later this week, with on Thursday the US Gross Domestic Product (GDP) numbers and on Friday the Fed’s preferred inflation gauge with the Personal Consumption Expenditures Index (PCE). A contraction or pullback in the numbers could mean another leg lower in the Greenback’s performance. 

Crude Oil (WTI) trades at $87.86 per barrel, and Brent Oil trades at $91.20 per barrel at the time of writing. 

Oil news and market movers

• Indian Oil refineries have processed 4.1% more crude in September than last year. Oil refiners in India processed 20.3 million tons of crude in September.
• Last week, Crude Oil prices rose for a second week in a row as markets continue to keep an eye on any supply disruptions in a spillover effect on the back of the Israeli ground invasion.
• Macquarie strategists have issued a report mentioning that there is a short-term upward risk in oil price, though in the medium-term oil prices are expected to head lower. 
• China is tapping into its Crude Oil stockpiles as it looks to boost its refining production, recent data revealed. 

Oil Technical Analysis: Gaza weak spot

Oil prices have had a second week of solid gains in their performance, though the rally starts to stall now. With again a delay in the possible ground invasion by Israel into Gaza, markets are starting to second guess if it will ever happen. This means a very big risk premium needs to be priced out, which could mean more downside risk in the balance for Crude prices. 

On the upside, the resistance level near $88 is the first level on the bulls’ radar. From there, the next level will be this year’s high at $94. Should a substantial squeeze unfold, look for $97.11, the high of August 2022.

On the downside, traders are bracing for the entry of that region near $78. The area should see ample support for buying. Any further drops below this level might see a firm nosedive move, which would cause Oil prices to sink below $70.

US Crude (Daily Chart)