WTI Flies High Following A Drone Attack On a Saudi Oil Facility

Oil prices rallied gapped higher an astonishing 12% at market open, after around 5% of global oil supply was removed following a drone strike on a Saudi Arabian oil facility over the weekend.

Oil stocks also surged and safe-haven demand for gold saw the yellow metal trade back above $1500 in early Asia. Houthi, an Iranian-backed rebel group has claimed responsibility for the attack, which has caused an ‘unknown’ amount of damage according to some reports. With it being too soon to estimate when the facility will be up and running, the supply disruption is likely to support oil prices for the foreseeable future.

Prices had invalidated a bearish trendline last week before today’s gap higher. With an intraday high at 63.34, prices are now retracing and trying to fill the gap (although there’s a still another $4.68 to go) and hovering just above the $60. Whilst it appears feasible to expect the gap to narrow, it also seems likely we’ll see a level of support created whilst markets readjust to the lower oil supply. If $60 breaks, look for 58.82 to support and see if a base can be maintained.

Of course, if we’re to see the oil facility return and operate as per usual, we could see a strong bearish follow-through in oil prices. But with investors on edge following the rise of geopolitical tensions, it suggests prices are at least to remain supported, if not lifted to new highs over the coming sessions.

The Canadian dollar strengthened and pared losses, placing USD/CAD under pressure. USD/CAD had rallied to a 7-day high on the back of firmer retail sales and consumer sentiment, but today’s sell-off see’s USD/CAD trying to carve out a bearish inside day. If 1.3289 holds as resistance bears can monitor it potential for a lower high to form. Given the bearish pinbar high on the 3^rd September and bearish range expansion the next day, it’s plausible that the current rally is corrective and traders may begin carving out a top.

Of course, other factors remain in play other than oil prices which could impact USD/CAD. Most notably, we have the FOMC meeting on Wednesday. Whilst markets have fully priced in a 25 bps cut, there calls for a 50 bps cut which could see USD strengthen if no further cuts are signalled by the Fed. Earlier in the session, Canada also release inflation data, so we’d expect USD/CAD to be vulnerable to bouts of volatility this week.

NZD/CAD has been under pressure and edged lower from the key resistance one outlined last week. The underlying analysis remains the same; the near-term bias remains bearish whit 0.8500 caps as resistance.

Related analysis:
NZD/CAD Teases Bears With A Swing-Trade Short

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.