Oil sinks over 3% in two trading days despite sanction risks against Iran

• WTI Oil sell-off persisted on Thursday, posting 3% losses in two trading days. 
• Oil prices broke below the pivotal $83.34 level, heading to $80.63 next.
• The US Dollar Index slides below 106.00 after a slew of central bankers are pushing against a stronger Greenback.

Oil prices retreat further on Thursday, extending the decline triggered on Wednesday after a string of headlines from the US President Joe Biden administration over tariffs and sanctions. On the tariff front, Biden called for higher fees on Chinese steel and aluminium. On the sanctions front, the US is set to reimpose sanctions on Venezuelan Oil and Gas while Washington considers adding sanctions on Iran’s Oil exports. 

The US Dollar, meanwhile, is facing pressure from several central banks across the world that are seeing their currencies depreciate against the US Dollar. The strength of the US Dollar is an issue for central banks as it trickles back inflation. In Asia, even a coordinated intervention could take place should the US Dollar Index (DXY) rally any further with Japan and South Korea set to jointly intervene in markets. 

Crude Oil (WTI) trades at $81.80 and Brent Crude at $86.44 at the time of writing.

Oil news and market movers: sanctions ahead

• Recent data shows that Iran is exporting the highest amount of Oil in more than six years, the Financial Times reports. 
• China is set to have a surplus of Oil production, expanding to 82m tons by 2030, according to Li Ran, a researcher at CNPC’s Economics & Technology Research Institute. This surplus would make up for any shortfall in the markets from OPEC and other suppliers.
• Leading Goldman Sachs Analyst Daan Struyven sees $90 as a ceiling for Brent Crude.
• The recent Crude Oil Inventories report from the US Energy Information Administration (EIA) showed that the Gulf Coast stockpiles are at their highest level in a year. Us Inventories grew by 2.74 million barrels, the highest since June 2023.

Oil Technical Analysis: Easing for now with tail risk in mind

Oil prices are not rallying despite the current stance from the Biden administration with sanctions being slapped on Venezuela and are set to be issued for Iran, which should be rather supportive for Oil prices. On the production front, Iran is number 3 and Venezuela is number 9 on oil production volumes within OPEC. Sanctions on Iran thus might be having a heavier impact on prices than the ones for Venezuela, which means the Biden administration will probably sanction non-oil sectors in order to avoid disruptions in the global Oil supply. 

With geopolitical tensions lingering, the $83.34 and  $90 handle should remain in grasp. One small barrier in the way is $89.64, the peak from October 20. In case of further escalating tensions in the Middle East, expect even $94 to become a possibility, and a fresh 18-month high could be on the cards. 

On the downside, $80.63 is the next candidate as a pivotal supportive level. A touch softer, the convergence with the 55-day and the 200-day Simple Moving Averages (SMAs) at $79.88 and $79.57 should halt any further downturn. 

US WTI Crude Oil: Daily Chart