UKOil retraced significantly towards its end-of-August low (green dashed horizontal) before finding support. Monday saw significant upside when the market opened following Saturday's brutal attack by Hamas on Israel and the start of a new Middle East conflict. Nerves still abound that the conflict may spread in the region affecting supply lines, and risk premiums are keeping the oil price supported.
Moreover, UKOil jumped today by more than 3% to trade near $90 a barrel. This follows the US further tightening its sanctions on Russian exports, which adds to an already tight market. Yesterday, the United States took a significant step by enacting sanctions against individuals who own tankers transporting Russian oil at prices exceeding the G7's established cap of $60 per barrel. This action aims to address the existing loopholes within the framework intended to penalize Moscow for its incursion into Ukraine.
In another development on Thursday, OPEC maintained its projection for an increase in worldwide oil demand. They pointed to encouraging indications of a robust global economy during the current year and anticipated additional growth in oil consumption, particularly in China, the planet's largest oil-importing nation.
The technical signals have not manifested on the daily chart yet. Bullish developments will include:
- A bullish cross of UKOil's green 5-day EMA above its orange 10-day EMA.
- The RSI moving above 50 and holding there, which would denote an underlying positive momentum.
- The EMAs developing angle and separation to the upside if they do cross bullishly.
We continue to monitor.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.