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Oil flat despite building pressure for premium add-on
Oil prices are at session's low this Friday despite surging tensions and calls for more premium to be priced in. Russia might be forced to breach its production cut promises for OPEC even further with Ukraine attacking strategic oil storage sites inside Russia with self-made drones. Meanwhile things are stiring up again in Asia with Middle Eastern prices jumping as buyers favor Persian Gulf Crude because of the shorter route against the longer one around Africa or the risky one via the Red Sea.
Meanwhile, the DXY US Dollar Index is caught in a difficult spot on the charts between two technical elements. The fact that the Greenback is unable to rally substantially comes with the rather small tweaking traders made to their positions, pushing back their rate cut bets from March to May. This makes the US Dollar able to strengthen a bit, but not substantially enough to move away from its current levels.
Crude Oil (WTI) trades at $73.85 per barrel, and Brent Oil trades at $78.86 per barrel at the time of writing.
>Oil News and Market Movers: Persian Gulf can't follow demand
Oil producing nations in the Persian Gulf are unable to follow demand with Asian buyers looking for Persian oil which is safer and does not need a risk premium priced in for a Red Sea passage or longer haul to get delivered.
Earlier this week headlines were coming out already that Russia was not complying with its OPEC production cut agreements. To make matters worse, Ukraine has started a new phase in its offence by attacking key Oil installations in Russia with drones. This could force Russia to pump up more Oil for its own use.
The Energy Information Agency (EIA) released Crude Oil Stock changes for the US on Thursday, with a drawdown of 2.492 million barrels against a build of 1.338 million last week.
The drawdown could be a side effect of the frost in Texas where refiners need to draw from the Cushing reserves with a key import pipeline closed for deliveries in the region and LNG terminals closed under the severe weather conditions.
The week will get closed off with the Baker Hughes US Oil Rig Count near 18:00 GMT. Previously there was a count of 499.
>Oil Technical Analysis: Russia remains key
Oil prices are set to close this week off in the green for both this Friday and its weekly performance. The number of geopolitical tensions are only broadening now that the Houthi rebels and the US are at a direct conflict. With these new drone attacks from Ukraine into Russia, the risk of retaliation from Russia will enlarge and might lead to the use of unconventional weapons on the battlefield.
On the upside, $74 continues to act as a line in the sand after yet another failed break above it on Friday last week. Although quite far off, $80 comes into the picture should tensions build further. Once $80 is broken, $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.
*Source: fxstreet