WTI Oil Gains Ground On Rising Geopolitical Uncertainty

Key Insights

• WTI oil is moving higher as traders bet that rising tensions between Russia and the West will hurt oil supplies. 
• China released weak PMI reports but traders focused on geopolitical problems. 
• WTI oil will get a boost if it manages to settle above the 20 EMA. 

Traders Focus On Potential Problems With Russian Oil

WTI oil is gaining some ground today despite disappointing economic reports from China.

China’s NBS Non-Manufacturing PMI declined from 52.6 in August to 50.6 in September, compared to analyst consensus of 52.8. NBS Manufacturing PMI increased from 49.6 to 50.1, while Caixin Manufacturing PMI declined from 49.5 to 48.1. Numbers below 50 show contraction.

The Chinese economy is slowing down due to strict coronavirus measures and declining foreign demand for Chinese goods. China is a major source of demand for oil, so any problems in the Chinese economy will put pressure on oil markets.

However, it looks that oil traders are ready to ignore bad data from China as they are focused on rising geopolitical uncertainty. The EU will soon release a new sanctions package, which should include a price cap on Russian oil.

Russia’s reaction to the oil price cap is unpredictable, but Russian officials have previously stated that the country would not supply oil to those who impose a price cap. This uncertainty provides support to oil markets as some traders believe that oil supply may be cut significantly.

Resistance At The 20 EMA Is The Key Level For WTI Oil In The Near Term

WTI oil managed to stay above the $81 level and is trying to get closer to the 20 EMA, which is located near the $84 level. This is a key level for WTI oil as the 20 EMA served as the main resistance on the way of all rebound attempts during the pullback in oil markets which started in June.

The second important resistance level is the 50 EMA at the $89 level. WTI oil managed to get above the 20 EMA for a few days in August, but this rebound attempt was stopped at the 50 EMA.

To have a chance to develop sustainable upside momentum, WTI oil must get above the 20 EMA. A real upside trend may begin when oil settles above the 50 EMA.

For a look at all of today’s economic events, check out our economic calendar.