- WTI began the week on the strong foot amid Saudi-Iran tension.
- The lack of fresh clues dragged the oil benchmark to fill in the week-start gap-up.
- Key activity numbers, trade/political headlines will be in the spotlight.
Despite witnessing a pullback towards filling the early-day gap-up, geopolitical tension in the Middle East keeps favoring WTI buyers as the black gold trades near $59.00 during the Asian session on Monday.
The Oil benchmark flashed a week-start gap-up reacting to the recent news that Yemeni rebels have warned of another attack on Saudi Arabia. Also, the reaction from the US and Saudi Arabia in the form of an increased military presence in the Middle East and a warning of war respectively offered additional support to the oil bulls. Furthermore, the Wall Street Journal’s expectations that it will take months rather than few weeks, as conveyed by the Saudis earlier last-week, to return to the full production also backed the bulls.
Read: Tensions in Middle East are on the rise, Oil prices a major focus
Keeping prices in check is the doubts surrounding the US-China trade deal as the recent visit of the Chinese delegates to the US had mixed reactions after the diplomats hastily left and refrained from visiting the US farms despite promising earlier.
It should also be noted that some of the media releases from the US and China have started taming the trade-war risk while few others are busy cheering the French efforts to broker the US-Iran peace backed by the French Foreign Minister’s latest comments.
However, fresh developments have neither being spotted at the geopolitical front nor at the US-China trade level, which could have pushed the buyers towards a profit-booking wave. Though, overall risk remains to the upside with the expected decline in global oil output due to the Saudi attack and a tensed condition in the region.
Moving on, key Purchasing managers’ index (PMI) numbers from the EU and the US for September month will be in the spotlight for fresh direction.
Technical Analysis
200-day exponential moving average (EMA) level of $57.90 seems crucial support to watch as it holds the gate to further declines towards six-week-old rising trend-line around $54.50. Alternatively, $60.00 round-figure, July high surrounding $61.00 and recent tops near $63.15 can keep the advances under check.
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