Crude Oil Price Defies Strong Dollar In Push to Continue Uptrend

Summary:
• The price of crude oil is above the 200-Day SMA and while a strong US dollar exerts downward pressure, the commodity remains resurgent.

Crude oil prices slipped marginally on Tuesday as a strong US dollar exerted downward pressure on the commodity. Brent crude was down -0.40% to trade at $86.50 per barrel, while West Texas Intermediate went for $81.99 per barrel, having shed -0.21%. Nonetheless, the commodity remains on the uptrend on the general daily price chart, above the 200-day SMA. Furthermore, on Monday, the price reached its highest level since November 3^rd.

Dollar-denominated crude oil typically experiences reduced demand when the greenback strengthens against other currencies as it becomes more expensive to buy the commodity. The US dollar is currently on the rise against major global currencies as traders reposition themselves ahead of a Fed interest rate announcement on Wednesday.

However, the black gold has support from improved demand outlook, building from the decline in US crude inventories in last week’s EIA release. In addition, the International Energy Agency revised upwards the daily demand growth by 110,000 barrels per day in its latest monthly report. Furthermore, the IEA forecast expects demand in the first quarter to rise to a higher-than-expected 1.7 million bpd. This will likely help keep crude oil price on the ascending trajectory in the near term.

Oil will also get support from the geopolitical front, as stakes rise in the Israel-Hamas and Russia-Ukraine wars. The two wars carry a $2-$3 risk premium according to analysts. In the latest developments, Ukraine has increased its attacks on Russian oil infrastructure, while Israel says it will proceed with its ground offensive in Rafah.  Furthermore, Goldman Sachs projects a peak summer price of $87 per dollar on Brent crude. These factors will likely put a lid on the impact of a strong US dollar.

Technical analysis

The RSI on the 30-minute WTI crude oil price chart favours the upside, as long as the buyers keep the price above the 81.50 pivot mark. The bulls will likely break past the barrier at 82.50 and meet the next resistance at 83.00 if they extend their control. Alternatively, the sellers could swing the momentum their way if they manage to keep the action below 81.50. That could see them breach the support at 81.00 and test 80.40 in extension.