WTI pulls back sharply from highest level since 2008, returns near $116, focus remains on geopolitics

• WTI has pulled back sharply to $116 after reaching its highest levels since 2008 above $127.50.
• Rumors of a Western ban on Russian exports fueled the initial rise, although Germany and Japan pulled back.

Although they are still trading with daily earnings of around $1.0 in the $116 per barrel zone, WTI futures from the previous month they have seen a substantial pullback from the highs of the previous session. For reference, WTI rallied to its highest levels since 2008 on Monday, hitting nearly 14-year highs around 127.505, a massive gain of close to $13.00 on the session. That means that even despite the $11+ retracement from intraday highs, WTI still trades with $20+ gains for the month, which is unbelievable given that it is only the seventh day of the month.

Geopolitics (Russia’s invasion of Ukraine and the West’s response with sanctions) has, of course, been the main bullish catalyst for the recent historic bull run. The latest bull run was triggered by talk by US leaders in the administration and Congress about a possible ban on Russian energy imports, as well as the coordination of such a ban with European and other partners. Germany and Japan seem to have ruled this out for now, news that is likely behind the aggressive reversal from the highs of the last few hours.

“With increasing geopolitical tensions, uncertainty and anxiety, it would be quite difficult to accurately gauge the high point of this rally,” one analyst said. “We view $125 a barrel, our short-term forecast for Brent crude, as a soft top for prices, although prices could rise further if disruptions worsen or continue for a longer period,” another UBS analyst said. . “A prolonged war could see Brent move above $150 a barrel,” they added.

One thing is for sure, amid enormous uncertainty on multiple fronts, volatility is likely to remain a feature of global oil markets for some time. Talks to revive Iran’s 2015 nuclear pact reportedly hit some snags over the weekend amid new Russian demands, clouding the prospect of an imminent return of much-needed Iranian oil exports. . The US now appears to be encouraging Venezuela to export more and seeking measures to increase production in North America, but if Russian exports are about to be cut off from global markets, this is likely to be considered too late. .

As major US banks and other Western countries fall in on themselves predicting that oil will soon climb to $100 a barrel, WTI seems likely to remain a buy on the dips. Amid heightened volatility, conditions will continue to be very challenging for intraday traders. WTI is currently testing last week’s highs at $116.00 and some may be tempted to add long positions in this area. If this level goes up, there is not much support until the $105-$107 area.

Technical levels