WTI probing $72.00, on course for second day of strong gains as bullish narrative builds

• WTI has continued to rally on Tuesday and was at one point probing $72.00.
• Receding Covid-19 fears, signs of strong demand and continued impasse in talks with Iran are all being cited as supportive.

The oil market’s impressive rebound has continued this Tuesday. After surging more than 5.0% on Monday from the $66.00s to the psychologically important $70.00 level, front-month WTI futures have pushed on to probe the $72.00 area on Tuesday. With WTI currently trading close to $71.50, that translates into on-the-day gains of nearly $1.50. WTI is now nearly up $10 from last week’s near-$62.00 lows. The next significant area of resistance for WTI is at $73.00 and then, above that, around $75.00. To the downside, any dips back towards the 200DMA at $70.00 remain subject to being bought.

Driving the day

Traders/analysts are citing receding Omicron fears, indicators of strong oil demand (the Saudis raised their official selling price to Asian customers over the weekend) and continued impasse in Iran/US/EU nuclear deal negotiations as supportive of the price action.

Referring to comments made by top US infectious disease expert Anthony Fauci on CNN over the weekend about the apparent mildness of Omicron infection symptoms, Jeffrey Halley, senior market analyst at OANDA, told Reuters that “the Fauci comments… saw more fast money returning to the long oil trade as markets started pricing a resumption of the global recovery and higher oil consumption”. “This (mildness of Omicron symptoms) lowers the probability of the worst-case scenario that the oil markets have been pricing in over the past couple of weeks” analysts at ANZ added.

Referring to Iran nuclear negotiations, CBA analysts Vivek Dhar said that while the talks could still find success when they recommence later this week, “markets may need to consider a more prolonged delay to Iranian oil exports”. This is a “positive for oil prices and supports OPEC+ plans to boost oil production through 2022” he added. Elsewhere, Chinese trade data overnight showed that imports had rebounded in November.