Oil prices: Crude extends gains as geopolitical tension belies bearish signals

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Published: April 9, 2019 7:43:50 AM

Oil extended gains to the highest since early November as an escalation of geopolitical conflicts in Libya and Iran belied technical indicators suggesting the rally is overdone.

Oil prices: Crude extends gains as geopolitical tension belies bearish signals (Reuters File photo)Oil prices: Crude extends gains as geopolitical tension belies bearish signals (Reuters File photo)

Oil extended gains to the highest since early November as an escalation of geopolitical conflicts in Libya and Iran belied technical indicators suggesting the rally is overdone.

Futures rose as much as 0.6 percent in New York after gaining 3.7 percent over the previous two sessions. Fighter jets bombed the Tripoli airport in OPEC producer Libya and U.S. President Donald Trump said he would designate Iran’s Revolutionary Guard a terrorist group. The 14-day relative strength index for West Texas Intermediate futures was at 77, above the 70 level that signals its in overbought territory.

Geopolitical flash-points in the Middle East and Venezuela have provided added upward impetus to oil as output curbs by the Organization of Petroleum Exporting Countries and its allies keep supplies in check. The prospect of some sort of resolution to the U.S.-China trade war and slivers of optimism over the global economy have also buoyed the demand outlook in recent weeks.

“Iran and Venezuela sanctions, Libya, Saudi Arabian production cuts: the list goes on of supportive geopolitical factors overriding the grossly overbought technical picture,” said Jeffrey Halley, a senior market strategist at Oanda Asia Pacific Ltd. in Singapore. “Throw in optimism on global growth, real or imagined, and picking a high in black gold is a fruitless task for now.”

WTI for May delivery climbed 13 cents, or 0.2 percent, to $64.53 a barrel on the New York Mercantile Exchange as of 9:41 a.m. in Singapore. It rose to $64.77 earlier after advancing 2.1 percent to settle at $64.40 on Monday, the highest closing level since Oct. 31.

Brent for June settlement added 5 cents to $71.15 a barrel on the London-based ICE Futures Europe exchange. The contract gained 1.1 percent to settle at $71.10 on Monday. The global benchmark crude was at a premium of $6.70 to WTI for the same month.

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