Oil Prices Climb as Russia-Ukraine Talks Stall, But Bearish Momentum Returns
Crude oil prices rise for four consecutive days, and no further progress is made between Russia, the US and Ukraine. As time progresses without a ceasefire or peace deal, the likelihood of one diminishes, triggering a spike in Oil prices. Oil prices on Monday rose to $65.78, the highest in 20 days, but the price retraced lower during this morning’s session.
Why Are Oil Prices Rising?
Oil prices extended their gains as investors grew discouraged by the lack of progress in resolving the Russia-Ukraine conflict. Russia is the third-largest oil exporter in the world behind Saudi Arabia and the US.
Over a week has passed since the meeting between US President Donald Trump and Russian President Vladimir Putin, yet no details of an agreement have surfaced. Adding to supply concerns, the White House reiterated over the weekend that new sanctions on Russia’s energy sector will be imposed within two weeks if no diplomatic settlement is reached. Such measures could tighten crude supply and further support prices. President Trump told journalists that he believes Putin's dislike of Zelensky is delaying a meeting between the two.
Such a move would also significantly escalate geopolitical tensions, as Russia currently relies on oil exports to fund a large part of the economy’s budget. However, the Vice President told journalists that during the Trump-Putin talks, the Russian President was willing to make concessions. Therefore, if momentum again gains speed, the price of Crude Oil can again come under pressure.
US Economic Data
The upcoming economic data is also likely to influence the pricing of the energy market. Today, investors will evaluate the release of the US Durable Goods Orders, CB Consumer Confidence and Richmond Manufacturing Index. However, the main releases of the week will be Thursday’s Gross Domestic Product and Friday’s Core PCE Price Index.
The price of Crude oil is likely to come under pressure if the economic data is weaker than the current projections, while the Core PCE Price Index reads higher. This would indicate a weakening economy while pressuring the Fed not to cut interest rates. On the other hand, if the Core PCE Price Index falls and the Gross Domestic Product rises, Crude Oil products are likely to rise further.
Currently, all energy products are trading lower on Tuesday. Heating Oil is 0.42% lower, Brent Oil -0.42%, and Gasoline is 0.44% lower. All global indices are also declining, indicating a ‘risk-off’ sentiment within the market.
Crude Oil - Technical Analysis
The price of Crude Oil is trading below the day’s VWAP, indicating that sellers are currently controlling the price movement. However, on a 2-hour chart, the price remains above most Moving Averages, meaning that most traders will focus on a retracement at first. When the price falls below the 75-bar EMA on the 2-hour chart, traders will switch their view to a potential full correction.
Crude Oil 10-Minute Chart
A retracement could see the price fall back down to $64.1,9, which would be a further 1.20% decline. The $64.19 would be key as it is in line with the 75-bar EMA and is the level where the resistance level potentially may flip to support. However, the price movement would depend on the progress between Russia and Ukraine as well as the upcoming US economic data.
If the price remains below the $65.00 level, sell signals are likely to remain intact for the short-term. If the price rises above $65.25, sell signals will start to fade until bearish momentum is regained.
Key Takeaways:
Crude oil hit a 20-day high at $65.78 amid stalled US-Russia-Ukraine peace talks and sanction risks.
Lack of progress and potential US sanctions on Russia’s energy sector could tighten supply and support prices.
US economic data this week (GDP, Core PCE) will heavily influence oil demand outlook and Fed policy expectations.
Technically, oil trades below VWAP with key support at $64.19; staying under $65 keeps short-term bearish pressure.
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[b]Michalis Efthymiou
HFMarkets[/b]
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