You seem interested in Crude trading. Let us share with you something important on current crude price optimism.
Look at this crude price chart that shows evident signs of optimism around the commodity in the near term. Notice the recent breakout from a stubborn resistance mark. It seems the bulls have enough strength to display more upward drifts in the coming days.
So, let’s jump to the point and try to find out what’s driving the crude bulls right now, one by one.
Let’s get started:
The US-Iran Conflicts
Escalating tensions in the Middle East remain the top driver for the recent crude price optimism.
The crude value has flared-up to a significant extent over US-Iran tensions. Both the counterparties have been at loggerheads for quite a long time. Now, with the recent killing of the Iranian military commander Qassem Soleimani, the fire between the duo got further intensified.
Soleimani was Iran’s second-most powerful figure and has helped Iran fight proxy wars against the rivals. On Jan. 3, Soleimani was killed in a US airstrike attack at Baghdad airport.
Soon after his death, Iran’s retaliation got instigated. And, as per Tehran-based Tasnim Newsagency, Iran has right now started the “second round” of attacks on US bases in Iraq.
Amid such a disgusting environment in the Middle East, the crude prices have gone straight up. Hence, undoubtedly, with more updates on the dispute front, chances for further upside for the oil prices remain significantly high.
The World might face a sudden shortfall in the overall crude supply in the near term out of Middle East tensions. As a response to this probable supply disbalance, the Organization of the Petroleum Exporting Countries (OPEC) ensured to take necessary steps when needed. However, the OPEC added that there still exist certain “limitations” from their end.
Recently, Mohammed Barkindo, Secretary-General of OPEC affirmed that the Iraqi oil facilities remain secured, and the country’s oil production will continue. This update might provide excellent short term relief. However, what’s next in the cards, no one can predict.
Weakened US Dollar Index
Crude Oil is priced in denominations of US Dollars. And, there is always an inverse relationship between the two.
Let’s say, 1 USD = 71.91 Indian Rupee.
If USD falls in value, then you will require lesser Indian Rupee to make a dollar. And, with the same dollar, you can get a barrel of oil. Hence, with less money, you are getting more oil. In action, demand will start growing, leading to a crude price upshot.
Now, look at the chart below. You can see the USD Index struggling at the bottom after a support region breakdown in late Dec. 2019.
Another red flag for the dollar is the recent “Death Cross” formation that might act as a prelude to future bearish moves. So, make sure to keep a check on the dollar benchmark.