Crude oil (WTI) soared more than 2.5% to $107.8 on Wednesday, following a pullback in the previous session when prices briefly dip to $98.55 per barrel. On Tuesday, the market mood was buoyed after President Putin's government indicated it would reduce some military activity in Ukraine to build trust in ceasefire negotiations. However, sentiment worsened today as geopolitical tensions heated up again.

Hopes of de-escalation seem to be fading on signs that Moscow is using the ongoing peace talks as a smokescreen to regroup for a new offensive. In fact, Russian forces were reported to be continuing to shell several targets on the outskirts of Kiev overnight despite pledges to scale back combat operations around the capital.

The latest developments have accelerated calls to levy new punitive measures against Moscow for its aggression, with the UK Prime Minister toughing up his stance and encouraging the West to double down on economic penalties.

While Europe has refused to sanction Russia's energy sector, pressure is mounting for some form of embargo. The EU may not ultimately pursue this avenue, but the mere possibility of further disruption to energy trade flows, coupled with the lack of progress in reinstating the 2015 Iran Nuclear Deal, creates a strong upside bias for oil prices. For these reasons, any pullback in WTI or Brent may be seen an interesting opportunity to build long exposure to the commodity.

Focusing on technical analysis, after a brief correction earlier in the week, WTI found its footing and managed to bounce off the trendline support near $98.55, resuming its ascent with a ~2.5% rise on Wednesday. If bullish momentum gathers pace in the coming sessions, price could be on its way to retest last Thursday’s high around $116.61. On further strength, the next major hurdle lies at the 2022 peak at $129.42.

On the other hand, if sellers return and spark a bearish reversal, initial support rests at 103.94, the 38.2% Fibonacci retracement of the December 2021/March 2022 upswing. If this floor is breached, oil could extend its decline and challenge trendline resistance and its 50-day simple moving average at $98.55.

CRUDE OIL TECHNICAL CHART

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