Crude oil has treated traders with sharp swings this week. After declining by 4.7% earlier in the week, crude has almost fully recovered. In Thursday’s North American session, West Texas Intermediate crude oil futures are trading at $57.77, up $0.79 or 1.34%. Brent crude oil futures are trading at $63.24, up $0.82 or 1.35%.
Middle East Tensions Weighing on Crude
On Wednesday, crude oil jumped 3.3%, its largest one-day jump since November 1st. Crude shot higher on the news after a report that Yemeni’s Houti rebels had intercepted a Saudi fighter jet. As well, there have been violent protests in cities across Iran, and authorities responded by shutting down internet services. The violence has spooked investors and put strong upward pressure on crude prices. Any negative developments in the Persian Gulf region could quickly translate into higher oil prices, as 20 percent of the world’s oil shipments move through the Straits of Hormuz, a narrow shipping route which runs between Iran and Oman. Tensions in the Persian Gulf remain high, and crude’s upward momentum has continued to buoy prices on Thursday.
On the domestic front, there were no surprises from a key U.S. crude inventory report on Wednesday. The Energy Information Administration (EIA) reported a surplus of 1.4 million barrels, which matched the forecast. In the past 10 weeks, the EIA has reported a drawdown only once, as crude inventories continue to rise.
Crude tested support at 55.00 early on Wednesday, but then rebounded with strong gains, breaking above resistance at 56.50. The upward trend has continued on Thursday, with crude testing resistance at 57.50. Above, the next resistance line is at 58.15, which has held since late September. This line has weakened and could be tested before the end of the week.
The 50-EMA and 200-EMA lines remain relevant. The 50-EMA is currently in a support role, at 55.96. The pair broke above the 200-EMA on Wednesday – currently, it is at 56.97.
This article was originally posted on FX Empire
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