Crude Oil News Today: Will Middle East Tensions Drive Crude Oil Futures Higher?

Crude Oil Futures Rise Amid Middle East Tensions

Crude oil futures closed 1% higher last week, driven primarily by escalating tensions between Israel and Hezbollah. The market has largely disregarded soft U.S. gasoline demand, focusing instead on potential supply disruptions in the Middle East.

Last week, Light Crude Oil Futures settled at $81.54, up $0.81 or +1.00%.

Geopolitical Risks Outweigh Demand Concerns

Israel has deployed troops to its northern border as attacks from Lebanon have increased. RBC Capital Markets analysts suggest a direct military confrontation between Hezbollah and Israel is becoming more likely. The potential for Iranian involvement or Israeli strikes on Iranian energy facilities poses a substantial threat to regional energy supplies.

Israel’s offshore gas operations are particularly vulnerable to potential Hezbollah attacks. More importantly, if Iran becomes directly involved, it could lead to a broader regional conflict, potentially affecting major oil shipping routes like the Strait of Hormuz.

Unexpected Inventory Builds

The U.S. Energy Information Administration reported unexpected builds in crude oil and gasoline inventories for the week ending June 21. Crude inventories rose by 3.6 million barrels, contrary to analysts’ expectations of a 2.9 million-barrel drawdown. Gasoline stocks also increased by 2.7 million barrels, defying projections of a 1 million-barrel decrease.

Weakening U.S. Gasoline Demand

Gasoline consumption fell below 9 million barrels per day, partly due to the impact of tropical storm Alberto on coastal areas. The four-week average for demand is about 2% below last year’s levels. This data has raised concerns about weakening demand in the world’s largest oil consumer, especially during the peak U.S. summer driving season.

Technical Analysis

The Light Crude Oil Futures chart shows a consolidation pattern between $72.08 and $86.24. The market has recently broken above the $80.22 resistance level, indicating potential bullish momentum. The current price of $81.54 suggests a possible upward trend continuation.

Market Forecast

The oil market outlook is bullish in the short term. While weak U.S. gasoline demand and unexpected inventory builds would typically pressure prices, these factors are currently overshadowed by the potential for supply disruptions due to escalating Middle East tensions.

Traders should closely monitor developments in the Middle East, as any further escalation could trigger a sharp price increase. Additionally, upcoming U.S. economic data releases will be crucial in assessing demand prospects and potential Federal Reserve policy shifts.

The consolidation pattern on the daily chart, combined with the underlying bullish factors, suggests a potential upside breakout. Traders should be prepared for increased volatility and the possibility of significant price movements, particularly if geopolitical tensions intensify or if economic indicators surprise to the upside.