Oil prices are retreating further despite several geopolitical, with traders choosing to ignore them because of no repercussions for the oil supply at the moment. The main risk event is a possible retaliation or action from China against the election outcome in Taiwan where the ruling Democratic party won with its demands for more sovereignty and independence. Meanwhile, several world leaders are joining Davos for the World Economic Forum, with several side meetings to discuss hot topics like Ukraine, Taiwan, the Red Sea, and Gaza tensions. Meanwhile, the DXY US Dollar Index is drifting sideways with markets on edge on any change in equilibrium in any of the above-mentioned hot topics. Intrinsically US Dollar strength is abating a bit as US economic data no longer beats estimates on all fronts, with several indicators starting to fall in contraction while the US labor data remains strong (for now). Traders have a holiday in the US, ahead of US Retail Sales and University of Michigan Consumer Sentiment later this week. Crude Oil (WTI) trades at $72.27 per barrel, and Brent Oil trades at $77.61per barrel at the time of writing.
Oil prices remain unfit to substantially head higher in 2024. Though several big geopolitical elements are hanging in the balance, no one alone looks to bear enough risk to demand a higher premium in Oil prices. While OPEC+ is still unable to jack prices up, or at least support them, it will be up to traders not to miss the boat if Oil prices jump on a geopolitical breakout. On the upside, $74 remains acting as a line in the sand after yet another failed break above it on Friday. Although quite far off, $80 comes into the picture should tensions build up further. Once $80 is broken, $84 is next on the topside once Oil sees a few daily closes above the $80 level. Below $74, the $67 level could still come into play as the next support to trade at, as it aligns with a triple bottom from June. Should that triple bottom break, a new low for 2023 could be close at $64.35 – the low of May and March – as the last line of defense. Although still quite far off, $57.45 is worth mentioning as the next level to keep an eye on if prices fall sharply.
