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Crude Oil Hits $77.72 Amid Red Sea Threats and Diesel Demand Spike

West Texas Intermediate (WTI) crude oil prices witnessed a significant increase of over 2% on Monday, driven by the persistent threat to shipping in the Red Sea and heightened demand for European diesel. However, gains were later moderated as the financial markets processed incoming inflation data.

WTI Crude Oil Price Chart - Source: Tradingview

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Factors Influencing Price Movements

A notable factor contributing to the upward price movement was the limited output from U.S. refineries, which are currently undergoing scheduled maintenance and overhauls. Additionally, a report by Reuters highlighted a significant drop in U.S. diesel exports to Europe in February, attributed to reduced refinery output and tighter domestic supplies.

According to data from Kpler ship tracking, diesel imports from the U.S. to Europe have almost halved this month, reaching 6.65 million barrels.

The aggressive actions of Yemen’s Iran-supported Houthis have impacted the route leading to the Suez Canal and highlighted the potential severity of this crisis on European diesel supply. These disruptions in Red Sea shipping are closely related to the decline in diesel exports.

Market Outlook and Security Measures

Recent efforts to curb Houthi aggression have intensified, with the European Commission’s naval defence joining forces with the U.S. and its allies to target Houthi positions on land.

Over the weekend, a successful interception of a Houthi-launched missile aimed at a U.S.-flagged tanker in the Gulf of Aden by the USS Mason highlighted the ongoing security challenges in the region.

With the Houthis having launched 59 attacks on commercial shipping in the Red Sea since February 21, the global community’s attention is riveted on the evolving situation and its implications for crude oil inventories and the broader market.

Crude Oil Price Forecast: Technical Outlook

In the trading session of February 27, Crude Oil demonstrated a marginal increase, with its price ascending to $77.61, marking a 0.07% uptick. This movement is encapsulated within a 4-hour chart framework, offering a granular view of the asset’s price dynamics.

The pivot point, established at $77.18, serves as a critical juncture for traders, indicating bullish sentiment above this threshold. Key resistance levels are identified at $78.38, $79.24, and $80.49, while support levels are set at $75.84, $74.71, and $73.56.

WTI Crude Oil Price Chart

The Relative Strength Index (RSI) stands at 53, signalling a neutral to slightly bullish market condition, complemented by the 50-day Exponential Moving Average (EMA) closely aligned at $77.22.

This confluence of indicators and price levels suggests a cautiously optimistic outlook for US oil, contingent upon sustaining the momentum above the pivot point.

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Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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