Oil flirts with new year highs as traders fear further supply woes

• Oil (WTI) pops higher and flirts with a new yearly high.
• The US Dollar is in wait-and-see mode ahead of the US Fed rate decision.
• Crude prices will be driven by headline risk from the Energy minister of Saudi Arabia. 

Oil prices firm up on Monday as traders brace for any comments from the Saudi Arabian minister of energy and oil that could further put pressure on the commodity. Crude prices already saw a big push higher earlier this month on the back of surprise comments from  Russia and Saudi Arabia, which outlined plans to extend any production cuts until the end of the year. The question is if Saudi Arabia will do more. 

Meanwhile, the US Dollar is facing a tough week with a very calm calendar until Wednesday. That day, the US Federal Reserve (Fed) will take a decision on interest rates and markets expect policymakers to leave interest rates unchanged. . In this context, the Greenback is expected to stay afloat until Fed Chair Jerome Powell delivers his speech after the decision. 

Crude Oil (WTI) price trades at $90.72 per barrel and Brent Oil at $94.85 at the time of writing. 

Oil news and market movers

• Russian Oil could fall into grace as US diesel producers are falling short of supply.
• Saudi Energy Minister Prince Abdulaziz bin Salman will address an industry conference later Monday. 
• Hedge funds boosted their price outlook on Brent and Crude to a 15-month high last week. 
• Diesel and gasoline prices at the pumps are rising quickly both in the US and Europe, fueling concerns over renewed energy inflation. 
•  The supply deficit might grow even larger should demand start to pick up from China, as recent macroeconomic data suggests.  
• Kazakhstan raised its daily Oil and Gas condensate production by 10% on Sunday from Saturday to 250,400 tons, according to data from the country’s Energy Ministry.

Oil Technical Analysis: too quick too high?

Oil prices are in a very thin equilibrium in which any hiccup in supply could trigger another price breakout to the upside in Oil futures. Although the Relative Strength Index (RSI) is in deeply overbought territory, the newsflow and possible drawdowns in US stockpiles could eke out that last touch of more gains. Still, a quick jump up to $93.12 isn’t expected as a bigger catalyst would be needed to cause such a big move. 

On the upside, the double top from October-November last year at $93.12 is the level to beat. Although this looks very much in reach, do not forget markets have already priced in a lot of possible supply deficits and plenty of bullish outlooks. Should $93.12 be taken out, look for $97.11, the high of August 2022.

On the downside, a pivotal level is at $84.30 from August 10. In case this level does not hold, a substantial nosedive might occur. In such a case, Oil prices might drop to a key floor near $78.00. 

WTI US OIL daily chart