Middle East Tensions Support Crude Oil Price at $70 Per Barrel

Middle East Tensions Support Crude Oil Price at $70 Per Barrel

Middle East Tensions Support Crude Oil Price at $70 Per Barrel

May West Texas Intermediate crude lost 33 cents, or 0.5%, to settle at $65.55 a barrel on the New York Mercantile Exchange.

In the 4-hourly timeframe, WTI failed to break the January highs of 66.50. Our short-term outlook and medium-term outlook on crude oil is bullish.

Crude oil prices rallied about 8 percent last week, largely on geopolitical risk, as U.S. President Donald Trump surrounded himself with more hawkish advisors.

"The fact that the government is encouraging the exchange and also is not shy about stepping in to occasionally change the rules may discourage global players", Brown said.

Initially, U.S. dollars may be used as deposit and for settlement, and in the future, more currencies will be used as deposit.

Ren Wei of South China Morning Post highlighted that China's recent move became possible due to the fact that the country had emerged as the largest oil importer in 2017, surpassing the United States.

But that "comes as Shanghai crude oil futures made a strong debut and was well received by investors", Kapadia said in emailed commentary.

"The rules around trading methodology will be unfamiliar for western houses", said John Browning, chief operating officer of Hong Kong-based futures broker Bands Financial Ltd, which is an approved overseas intermediary for the INE.

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XM investment analyst Andreas Georgiou said that if the EIA's weekly report shows a smaller than expected rise in inventories, or a drawdown, prices could be supported.

McKenna said he hoped Shanghai crude “gets a lot of traction and we end up with three established global benchmarks”, but he cautioned that “the first couple of days have been volatile”.

The price of Brent hit $71 per barrel in the middle of January, despite surging production by the United States, which is offset by the production cuts led by the Organisation of Petroleum Exporting Countries (OPEC) and Russian Federation.

The most-active September contract opened at 440.4 yuan ($69.78) per barrel versus a reference point of 416 yuan, jumping as high as 447.1 yuan ($70.85) in the first few minutes.

The decision to extend the production cuts has seen crude oil prices rising, but a major factor countering efforts by OPEC and Russian Federation is U.S. oil production which has soared and is fast approaching 10 million bpd.

At 0316 GMT, Shanghai's September contract was down 1.43 percent at 427.6 yuan ($68.33) per barrel.

Brent and WTI, in contrast, were down by that time, weighed down by concerns over a looming USA trade dispute with China.

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