Oil consolidates above $84 with geopolitics and OPEC report in the mix

• WTI trades back above $85 after a small retreat earlier this week. 
• Oil traders remain bullish amid reports of a potential Iranian retaliation against Israel or US assets in the Middle East.
• The US Dollar Index sprinted to 105.00 on a hot US inflation report ahead of the ECB meeting.

Oil prices are stretching higher on Thursday and could further jump with geopolitical tensions spiraling out of control and ahead of the key monthly report from OPEC. On the geopolitical side, CNN reported that US intelligence expects a flare up in attacks from Iran on Israeli or US assets in the Middle East in response to the Israeli attacks in Damascus. The Iranian-backed Houthi rebels in Yemen, meanwhile, are targeting vessels again in the Gulf of Aden and are attacking a US destroyer, Reuters reported. 

The US Dollar is returning to the Iron Throne after a long hiatus this year. The Greenback made its way back above 105.00 after the US Consumer Price Index (CPI) for March came in higher than what economists broadly expected. A red-hot inflation print fully erases any possibility of the US Federal Reserve (Fed) cutting before the summer, and even the number of rate cuts for overall 2024 appears to be put into question. All elements seem to play in favor of the US Dollar ahead of the European Central Bank meeting later on Thursday. 

Crude Oil (WTI) trades at $85.94 and Brent Crude at $90.33 at the time of writing.

Oil news and market movers: Geopolitical tensions grow

• The monthly OPEC report is set to be released later this Thursday. No real change is expected besides a prolonging of the current production cuts.
• Mexican Oil exports are steady, though not recovering after Oil exports in March tumbled to the lowest levels since 2019, Bloomberg reports.
• US Intelligence believes major drone and missile strikes by Iran are set to take place, both Bloomberg and Reuters report.
• Occidental Petroleum Corp. is set to restart its Gulf of Mexico output after a pipe leak earlier.  

Oil Technical Analysis: US strategic reserve build-up economics

Oil prices are jumping higher with tensions in the Middle East nearing a new dynamic. After Iran vowed to retaliate against Israel or any US asset in the region, tensions are getting high as such an attack could drag the whole region back into a long drawn-out dispute with the risk of Oil delivery disruptions. These elements are enough for traders to price in more risk premium in crude, which is making its way to $90.

If the high of last week at $87.12 gets broken, the $90 handle should come into 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, $83.34 is the first level to have a look for after a very clean break and test for support on April 1 and 2. Should it not hold, $80.63 is the next best candidate as a pivotal supportive level. A touch softer, the convergence with the 55-day and the 200-day Simple Moving Averages (SMAs) at $79.32 should halt any further downturn. 

US WTI Crude Oil: Daily Chart