Oil rebounds from weekly trough as investors welcome lower prices

• WTI Oil steadies near $71.50, finding a floor after Monday’s decline. 
• US Secretary of State Anthony Blinken landed in Israel to outline measures to secure safe passage in the Red Sea. 
• The DXY US Dollar Index holds above 102.00, with traders split between Goldilocks or geopolitical safe-haven scenarios. 

Oil trades near $71.50 on Tuesday, bouncing off Monday’s low near $70, after Saudi Arabia lowered prices of its Oil exports into Asia. Meanwhile, analysts and fund managers are welcoming the current decline in Oil prices, which will bring inflation further down. On the other hand, with lower prices at hand, several large projects which were put on hold due to high energy prices could come online again and create a resurgence in demand soon.. 

Meanwhile, the DXY US Dollar Index is holding ground at 102.00 despite some selling pressure overnight. US and Japanese equities jumped substantially in a risk-on mood. The Nikkei even printed a new 34-year high. Traders are ignoring the escalation in geopolitical tensions, with elections in Taiwan over the weekend and Middle East tensions alive after Israel claimed it found Chinese weaponry in the hands of Hezbollah. 

Crude Oil (WTI) trades at $71.61 per barrel, and Brent Oil trades at $76.81 per barrel at the time of writing. 

Oil News and Market Movers: A lot of talks

• Adding to the news of Saudi Arabia offering substantial discounts, Oil prices also reacted to rumours that shipping freight companies paid fees to Houthi rebels in order to get safe passage in the Red Sea region. These rumors were quickly dismissed by several shipping companies.
• US Secretary of State Anthony Blinken landed on Monday in Tel Aviv to further discuss the current situation with Israel’s Prime Minister Benjamin Netanyahu and to further outline an international task force that will monitor the Red Sea passage.
• With the decline in Oil prices, the US Consumer Price Index (CPI) on Thursday is expected to further come down. Lower prices could trigger a pickup in demand, with several oil-dependent projects coming back online. 
• The American Petroleum Institute will release on Tuesday its weekly stockpile change numbers. There was a huge drawdown of $7.418 million barrels in the previous week, and there is no forecast for this week’s numbers. 

Oil Technical Analysis: Demand comes back 

Oil prices are finding a floor as markets have priced in Aramco’s discounts for its sales. With this additional correction, several buyers could come back into the market at these substantially lower prices. Meanwhile, a goldilocks tone in global markets could spark up demand again, while frost temperatures have arrived in Europe and will trigger demand for energy commodities. 

On the upside, $74 is still holding importance, although the level has become very chopped up. Once back above this, $80 comes into the picture. Still far off, $84 is next on the topside once Oil sees a few daily closes above the $80 level. 

Below $74, the $67 level could still come into play as the next support to trade at as it aligns with a triple bottom from June. Should that triple bottom break, a new low for 2023 could be close at $64.35 – the low of May and March – as the last line of defence. Although still quite far off, $57.45 is worth mentioning as the next level to keep an eye on if prices fall sharply. 

US WTI Crude Oil: Daily Chart