WTI still defensive on fresh geopolitical escalation

The WTI crude oil is maintaining its defensive stance after posting the biggest daily loss in two weeks. News has said that Ukrainian drones renew fresh geopolitical fears by attacking deep inside Russia. The said drones attacked military bases hundreds of miles inside Russia and escalated war. This serious development renews the geopolitical tension which previously drove oil higher.

Additionally, Moscow rejects supplying Oil under the G7 price cap. Firmer US Dollar adds strength to the bearish bias and China-linked optimism favour commodity bulls.

WTI crude oil consolidates the biggest daily loss in two weeks by making rounds to $77.50 early Tuesday. In doing so, oil also justifies the optimism surrounding China and supply-crunch fears emanating from China.



The Group of Seven (G7) price cap on Russian seaborne oil came into force on Monday as the West tries to limit Moscow’s ability to finance its war in Ukraine, but Russia has said it will not abide by the measure even if it has to cut production.

Firmer US data renewed hawkish expectations from the US Federal Reserve (Fed) and challenged the commodity buyers. That said, US ISM Services PMI rose to 56.5 in November versus 53.1 market forecast and 54.4 previous readings whereas the Factory Orders also registered 1.0% growth compared to 0.7% expected and 0.3% prior.

Alternatively, optimism surrounding China’s economic growth, due to the latest easing of covid concerns and re-opening appears to keep the WTI crude oil buyers hopeful. On Monday, China is on course to downgrade its management of COVID-19 from a top-level Category A infectious disease to a less strict Category B disease as early as January.

Moving on, Oil traders should pay close attention to the geopolitical and Covid-linked headlines for clear directions. Also important will be the private inventory data from the American Petroleum Institute (API) for the week ended on December 02, prior 61.3.