WTI Crude - No Bullish Pressure Despite Deepening Crimean Crisis

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 |  Includes: CRUD
by: Dean Popplewell

By Mingze Wu

Crude Oil remained mostly stable this today even though the Crimean referendum pushed the region one step closer to unification with Russia. This calmness and stability is not limited to Oil, with Precious Metals, Equities and Fixed Income products staying mostly flat as market already expected the Russian majority to vote for secession. The outcome was skewed in the favor of pro Russian supporters when oppositions choose not to vote, claiming that the referendum was unconstitutional. Nonetheless, with voting rate of about 80%, it is unlikely that the minority votes would have changed the outcome given current 93% voting in favor.

The question that remains in doubt is whether US and eurozone will carry out the economic sanctions against Russia as planned. There were reports on Friday saying that sanctions could come in as early as today, but until now we've yet to hear anything coming out from either US nor eurozone pertaining to the course of action that they would be taking in light of the referendum result. Whatever the case may be, it is clear that we are still a few steps away from military conflict, and there is very little reason for Crude Oil traders to worry right now. Even in the event that energy supply is cut due to extreme economic sanctions/war, it is debatable whether WTI will benefit from it due to export restrictions while other benchmarks such as Brent Crude are bound to enjoy a bigger benefit.

Hourly Chart

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From a technical perspective, the overall bearish pressure remains intact as long as we stay below 99.50. However, it should be noted that prices are actually above the 99.0 round figure - the levels before a surprising bearish DOE inventory report sent prices packing down to 98.0, suggesting that prices are still relatively bullish and a sharp sell-off in Oil is less likely. That being said, if prices break 99.0 and the dotted rising trendline, we could see acceleration towards 98.0 and potentially below for a bearish extension scenario.

Daily Chart

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The daily chart agrees with the bearish extension scenario as prices appear to be finding resistance from the descending Channel Top, which opens up a move towards the Channel Bottom, which is well below 98.0 and in fact lower than 96.0 right now. Stochastic readings favor bullish scenarios moving forward but if a bullish signal is averted, we could easily see prices pushing lower as that can be a confirmation that bulls are unable to sustain any significant fightback.

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