The trade wars are currently dominating the news platform and at the same time affecting the market’s volatility.
This article is originally referred from IronFX News.
Commodities are on a general sell off or are somewhat held back by the developments on the matter, which is not expected to be resolved easily.
China and Europe have vowed to retaliate on US tariffs and this leads us to examine how the game affects the oil market in the future.
On Monday, Angela Merkel at her meeting with China’s PM Li stated they are willing to stick to the 2015 Iran nuclear deal.
The idea was also backed from the Chinese representative which added that the consequence of scraping the Iranian deal could have unpredictable outcomes.
Theoretically speaking, this could be creating further developments in the market as a whole and could be seen as a retaliation act.
France’s prime minister has also indicated that the Iranian nuclear deal should be held and they are trying to influence the US in order to keep.
Furthermore, it is an indication that Iran will be supplying Europe with Oil, but the companies purchasing the Oil could suffer charges.
In our opinion, this is an indication that some countries are in need of Iran at the moment, since they are backing the Middle Eastern country openly.
The US could be forced to bargain on the Iranian deal if many countries choose to continue to import Oil from Iran.
Oil prices could strengthen further if the focus remains on this subject, as Europe and China are going against the US which intends to leave Iran out of international business.
This action is risking the relationships between the continents but also signifies that the Iranian Oil is somewhat a good deal and purchasers are not willing to look for black gold elsewhere so easily.
On the other hand, Iranian Imports to India fell by almost 16% in June compared to May. This is something we noted in a previous report and is believed that the decrease is due to sanctions fears.
However, due to an increase in the reduction which went from 705,200 bpd in May to 592,800 bpd in June, we would like to emphasize the fact that more countries could be reluctant in doing business with Persia in the future and are buying petrol from other countries.
Moreover, some countries have asked the US for exemptions on Iranian sanctions and according to US secretary of state Mike Pompeo these appeals will be considered and decided upon.
On another front, news coming from Norway confirmed a mass strike by Oil workers which is reducing market supply by 23,000 barrels per day.
The news was widely exposed but had minor market influence as yesterday Oil prices had a minor boost reaching over $74 per barrel but corrected during today’s Asian morning to $73.60 p/b approximately .
On a separate note on Tuesday, OPEC made a request to Canada to invest in infrastructure in order to move oil and gas more efficiently, according to Reuters.
This request displays that OPEC has seen an insufficiency in Canada’s oil production and storage and more specifically, Canadian pipelines capacity.
Canada has made steps towards improving its oil production sector back in May when it purchased the Trans Mountain oil pipeline but seems it has a few more improvements to do.
OPEC officials added that should Canada fail to add pipelines and improve circumstances, investments could be reduced and transferred to their neighbors, the US.
For Oil to make the extra step and reach $75 per barrel or over, the market may need that significant news release that would be unexpected.
The vastest reaction from Oil prices would be coming in case of a geopolitical scenario or an easing stance towards the Middle East. However, Oil prices are already too high and a bullish sentiment remains firmly.
It must be noted, that our previous resistance levels and support levels remain exactly the same as our previous report and they have not been broken since last week.
Oil prices remain on a high and the positive sentiment is currently being displayed.
If the commodity is overtaken by a bullish movement, it could move up towards the $74.50 (R1) resistance level and break it, moving further near the $75.50 (R2) resistance barrier.
We support the case that if a drawdown from the Crude Oil Inventories is realized today Wednesday 11th of July (15:30 GMT) prices could move higher.
However, we must note that our $74.50 (R1) resistance level has proven to be a very strong level and has been tested various times in the past 10 days.
On the other hand, a strong support level at $72.60 (S1) has been viewed and tested on the 5 th and the 6 th of July.
Crude Oil could continue to move in a sideways movement between (R1) $74.50 resistance level and the $72.60 (S1) support level as has been the case in July.
If for any reason, the EIA crude Oil inventories release a surplus today, Crude Oil could enter a bearish movement and could move downwards towards the $72.60 (S1) Support level and even breach it aiming for the $71.60 (S2) Support hurdle
Original Source: IronFX News