Oil prices are taking a hit today with an over-2% drop on both Brent (OIL) and WTI (OIL.WTI). Crude prices are being pressured by positive comments on the state of Iran nuclear talks as well as positive geopolitical developments.
The United States said that they want to reach an agreement with Iran or at least make progress in talks by mid-February or in early-March. Chief Russian negotiator was more upbeat, saying that nuclear talks with Teheran are on the finishing line. Meanwhile, Iran still refuses to return to enrichment limits that were in place under the 2015 agreement. Iran has the capacity to boost its production from current 2.5 million barrels per day to 4 million barrels per day. However, what's even more important is that reaching the deal will unlock Iranian oil exports that are almost non-existent right now. Once a deal is reached, Iranian oil exports could quickly jump to 2.0-2.5 million barrels per day. This would make the fundamental picture less bullish and could trigger a deeper drop.
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Open account Try demo Download mobile app Download mobile appOil prices have been climbing recently on the back of increased geopolitical tensions amid possibility of Russia invading Ukraine. While the risk of conflict remains real, markets welcomed comments made by French President Macron after meeting with Russian President Putin. Macron said that he received assurances from Putin that the Russia-Ukraine conflict will not escalate.
While these are positive developments for the global economy (and negative for prices), they are still just comments, not real actions. Nevertheless, oil market reacted accordingly with Brent and WTI prices dropping over 2% today. Taking a look at OIL.WTI chart at H4 interval, we can see that the price rally was halted after reaching a 127.2% exterior retracement of the October-November 2021 downward move. Price dropped back below $90 per barrel following today's drop. The nearest technical support is marked with 100-period EMA (blue line). However, key support can be found lower and is marked with the lower limit of the market geometry. A break below this $86 per barrel could be followed by a deeper downward move.
Source: xStation5
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