WTI: Eeking out gains onto the $57 handle

• WTI inching higher in Asia and extending the upside.
• Iran continues to play a role in the upside risks in the price of oil.

A combination of strong summer fundamentals and geopolitical risks have supported the price of oil at the start of this week. On Monday, West Texas Intermediate crude for September delivery on the New York Mercantile Exchange rose 67 cents, or 1.2%, to close at $56.87 a barrel while spot prices added around 1.62% having travelled from a low of $55.73 to a high of $57.00bbls. In Asia, oil is making further traction with gains in WTI of over 0.20%.  

Ongoing supply concerns stemming from the Strait of Hormuz risk have underpinned the upside. The New York Times reported that Iran for the first time tied the British seizure of an Iranian oil tanker to the ailing nuclear deal yesterday, calling it illegal and a violation of the agreement.

“By making that link, Iran appeared to be trying to press the Europeans to make good on the promised financial benefits of the 2015 agreement known as the Joint Comprehensive Plan of Action, or J.C.P.O.A,” the article read.

“Since Iran is entitled to export its oil according to the J.C.P.O.A., any impediment in the way of Iran’s export of oil is actually against the J.C.P.O.A.,” Iran’s deputy foreign minister, Abbas Araghchi, said after emergency talks in Vienna with other parties to the nuclear deal, according to the NYT.  

Meanwhile, other antagonistic headlines from today, Iran’s commander says Iran and Russia to hold a joint naval drill in the Indian ocean in the near future, as tensions grow between Iran and West over the passage of oil tankers through Strait of Hormuz.

“We have agreed on a joint naval drill in the Indian Ocean region, and we hope that it will be held by the end of the year,” Hossein Khanzadi told official IRNA news agency. An Iranian navy commander said, “Coordination and planning meetings (over the drill) between Tehran and Moscow will start soon,” he noted.

WTI levels

Technically, the price has been capped by the 200-day moving average but a break there will open risk towards 57.40 and the 50-day moving average which guards the 20-week moving average. Bulls will then look to the 60 handle and double top in the 60.80s. On the downside, a break of support located on the rising support line of the channel at 55.80, opens 54.60, (61.8% Fibo.).