Oil prices pull back from December highs as traders monitor Red Sea developments

Posted By: EN Todayon: December 27, 2023In:

Oil futures pulled back from December highs early Wednesday as investors continued to monitor developments in the Red Sea amid worries over potential disruptions to crude shipments.

Price action

West Texas Intermediate crude for February delivery
CL00,
-0.74%

CLG24,
-0.74%

CL.1,
-0.74%
fell 53 cents, or 0.7%, to $75.04 a barrel on the New York Mercantile Exchange.
February Brent crude
BRNG24,
-0.62%,
the global benchmark, declined 45 cents, or 0.6%, to $80.62 a barrel on ICE Futures Europe.
January gasoline
RBF24,
-0.16%
fell 0.1% to $2.169 a gallon, while January heating oil
HOF24,
-0.35%
was off 0.2% at $2.662 a gallon.
January natural gas
NGF24,
+4.47%
rose 4.5% to $2.664 per million British thermal units.

Market drivers

Oil rose to December highs on Tuesday after Yemen’s Iran-backed Houthi rebel militia claimed responsibility for a missile attack against the a containership MSC United VIII, and for an attempt to attack Israel with drones.

The attacks rattled investors, coming after the U.S. last week announced the formation of a naval coalition to address attacks in the region. Crude had initially saw pressure on Tuesday after shipping company Maersk over the weekend said it would resume shipments via the Red sea.

The concerns saw WTI clear resistance in the $74-$75 a barrel range on Tuesday, though the “bullish market reaction” looks relatively weak given the potential for disruption, said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, in a note.

“The rally will likely continue at a gentle speed,” she said, with the next natural target for oil bulls stands at the 200-day moving average near $78 a barrel, “but the price should meet solid resistance at this level due to weak momentum.”

A bearish “death cross” pattern appeared Tuesday, with the 50-day moving average for WTI crossing below the 200-DMA.

The 50-DMA is a widely followed short-term trend tracker, while many view the 200-DMA as a dividing line between longer-term uptrends and downtrends. So a death cross is seen by many Wall Street chart watchers as marking the spot that a shorter-term pullback transforms into to a longer-term downtrend.

See: Crude oil sees first real ‘death cross’ since the pandemic plunge of early 2020