Oil jumps as Biden lands in Tel Aviv amid escalating Israel-Palestine conflict

• Oil (WTI) trades near $88 and might break above $90 if tensions further build up in the Middle East.
• The US Dollar is in a third consecutive negative trading day.
• Oil could edge further up, although  the fading threat of supply cuts limits its upside potential.

Oil prices soar on Wednesday, making good on the losses from Monday and setting forward a positive return for this week. The main driver for Oil prices  is the visit from US President Joe Biden to  Israel, which could not have been at a worse timing. Biden landed around 08:00 GMT in Tel Aviv, hours after  a hospital was bombed in Palestine with hundreds of casualties. Biden is left to take a stance in the conflict while trying to defuse tensions, with any wrong word having the potential to make the current conflict between Israel and Hamas become a feared proxy war.     

Meanwhile, The US Dollar (USD) is being torn in two camps. On the one hand, traders want to appreciate the Greenback with these tensions in the Middle East. On the other hand, the US macroeconomic numbers are starting to point to a possible recession for the US. Either way, the US Dollar is moving in tight ranges and is making baby steps lower for a third consecutive day when measured by the US Dollar Index (DXY).

Crude Oil (WTI) trades at $87.31 per barrel, and Brent Oil trades at $90.84 per barrel at the time of writing. 

Oil news and market movers

• The Russian Ministry of Finance has set the cut-off price for Russian Rurals Oil at $75 per barrel. This is a substantial discount compared to Brent Oil, which  is trading near $90, making it a $15 discount for India, China and other nations daring to buy Russian Oil with EU and US sanctions in place.
• Mexico has conducted its annual Oil-export hedging program. The price target with the hedged would allow the nation to sell their oil at $80 per barrel as floor. 
• The American Petroleum Institute (API) released its report on Tuesday. After the build of 12.94 million last week, a drawdown of 4.383 million barrels was reported.
• The US Energy Information Administration (EIA) is due to print its weekly stockpile change at 14:30 GMT. Expectations are for a drawdown of only 0.3 million barrels after the 10.176 million build from last week. 

Oil Technical Analysis: Gaza remains key

Oil prices are pushing higher as markets are pricing in a risk premium again. With several neighbouring countries starting to build up tensions on Israel to open up borders and let refugees flee the strip, pressure builds further toward a broader war. With that risk as hangover on the price action and possibly another big drawdown in US stockpiles, a pop in prices looks granted. 

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)