- WTI has pulled back sharply on Tuesday from Monday’s multi-year highs near $96.00 and is back at $91.00.
- Fears of an imminent Russian invasion of Ukraine have subsided as Russia withdraws some troops, weighing on oil prices.
oil prices have retraced sharply from Monday’s multi-year highs, and WTI futures from the previous month are now trading below $92.00, down around $3.0 per day and down $4.0 from Monday’s multi-year high near $96.00. Media reports of the withdrawal of troops from the Ukrainian border to their bases have spurred a rebound in risk appetite and a reduction in demand for safe havens on Tuesday.
Such flows could go further in the wake of comments by Russian President Vladimir Putin, who just said a decision had been made on partial troop withdrawal. For oil, tentative signs of de-escalation have triggered profit-taking as geopolitical risk premiums ease a bit, though Western nations and NATO remain highly concerned that Russia will retain the option of a near-term attack. .
One issue to keep in mind is that Russian President Vladimir Putin could imminently recognize the independence of the Luhansk and Donetsk People’s Republics (LPR and DPR), both breakaway regions of Ukraine located in the East. Western officials have criticized Russia’s State Duma for voting in favor of recognition, which would break the Minsk Agreement designed to implement a ceasefire in Ukraine’s civil war.
Geopolitical strategists fear that Russia could create a false pretext for military action against Ukraine by reigniting violence in the East, with recognition of the independence of the LPR and DPR as a potential step in this direction. For now, WTI traders will remain on tenterhooks and trading conditions will continue to be choppy/headline driven.
Short-term WTI bears will likely see an impending test of an uptrend that has been supporting price action all of 2022 so far at $90.50. A break below this could see oil prices quickly retrace below $90.00 and reach support in the form of last week’s lows at $88.50. In addition to the geopolitics of Eastern Europe, oil traders will also be keeping an eye on the upcoming weekly private US oil inventory data at 21:30 GMT, as well as indirect US nuclear talks. and Iran, which continue to resonate in the background.
Additional technical levels
Source: Fx Street