West Taxes Intermediate (WTI) for February delivery rose roughly 0.29 percent to settle at $60.283 a barrel. In earlier trading, the contract touched $60.684, the highest intraday level since June 2015. Oil settled close to a 30-month high after days of civil unrest in Iran failed to interrupt supplies from OPEC’s third-biggest crude producer.
A retreat from a session high showed an ease on oil price as major pipelines in Libya and the UK restarted and U.S. production soared to the highest in more than four decades. It was the first time since January 2014 that the two crude oil benchmarks opened the year above $60 per barrel, driven by large anti-government rallies in Iran and ongoing supply cuts led by OPEC and Russia.
Despite the turmoil from Iranian anti-government rallies that began Thursday in the north-eastern city of Mashhad initially targeted the government’s handling of the economy, the focus expanded within a day to the religious places and state security forces.
“I would not be surprised if any outcome of the current crisis would be ultimately negative for the oil price,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “Should the protests lead to regime change, it might attract massive new investments and result in higher output.”
As an OPEC’s third largest crude producer, Iranian oil industry and shipping sources said that protests have had no much impact so far on oil production or exports. However, geopolitical risks are clearly back on the crude oil agenda after having been absent almost entirely since the oil market ran into a surplus in the second half of 2014.
Despite the day’s weakness, WTI remains in solid, long-term bullish trend, which has been supported by a year of production cuts led by the OPEC and Russia started in January 2017 and are scheduled to cover all of 2018. Additionally strong demand growth, especially from China, has also been supporting crude.
However, rising U.S. oil production, which is on the verge of breaking through 10 million bpd, has posed a threat the bullish outlook.
Broader outlook for WTI, showed in weekly chart, remains titled to the upside, while approaching a key resistance found at last session high in May 2015. The outcome of breaking through the resistance will result in how far the oil will increase.
Figure 1: WTICOUSD Weekly
A technical indicator “Bulls Power” in the daily chart signals its downward risks on price, as the oscillator turns downwards from the top within a few days.
Figure 2: WTICOUSD Daily