WTI fails to hold on to recovery gains above $72
- Long-term demand outlook continues to weigh on commodities.
- Rising political tensions between Saudi Arabia and the United States limits losses.
- Coming up: Weekly crude oil stock report from the API and the EIA on Tuesday and Wednesday, respectively.
Escalating geopolitical tension over the disappearance of a Saudi journalist helped crude oil prices start the week on a positive note as Saudi officials said that they would retaliate to any actions taken against them in response to U.S. President Donald Trump's threats. After advancing to a fresh 2-day high at $72.70, however, the barrel of West Texas Intermediate lost its traction in the second half of the day after Trump's latest tweet eased the concerns and investors turned their attention to the weakening global demand outlook. The WTI was last seen trading near $71.50, where it was virtually unchanged on a daily basis.
"Just spoke to the King of Saudi Arabia who denies any knowledge of whatever may have happened “to our Saudi Arabian citizen.” He said that they are working closely with Turkey to find answer. I am immediately sending our Secretary of State to meet with King!," Trump tweeted out.
Commenting on the market reaction to the political drama, "if the Saudis don't come to the rescue when the Iranian sanctions kick in, you're really going to be short this market. It's going to be a very undersupplied market. That was the fear that was initially driving prices higher," Phil Flynn, an analyst at Price Futures Group in Chicago, told Reuters.
Technical levels to consider
The initial support for the WTI could be seen at $70.60 (Oct. 12 low) ahead of $70 (psychological level/50-DMA) and $69.05 (Sep. 4 low). On the upside, resistances are located at $72.70 (daily high/20-DMA), $73.70 (Sep. 28 high) and $75 (psychological level).