Oil News: Bullish Sentiment Prevails as Middle East Risks Escalate

Oil Prices Rise Amid Middle East Tensions

Oil prices climbed on Thursday, extending gains from the previous session, as geopolitical tensions in the Middle East raised concerns about potential supply disruptions.

At 10:00 GMT, Light Crude Oil Futures are trading $78.47, up $0.56 or +0.72%.

Geopolitical Risks Fuel Price Surge

Brent crude and West Texas Intermediate futures both rose, building on Wednesday’s 4% jump. The killing of Hamas leader Ismail Haniyeh in Tehran and a senior Hezbollah commander in Beirut heightened fears of the Gaza conflict expanding regionally. These events sparked worries about potential disruptions to oil supply from the Middle East.

Strait of Hormuz Concerns

Analysts highlighted the risk of Iran potentially blocking the Strait of Hormuz, a crucial waterway for global oil transport. Such a move could threaten 15-20% of global oil supply, with limited alternative pipeline capacity available.

US Inventory Data Supports Prices

Adding to the bullish sentiment, U.S. crude oil stockpiles fell by 3.4 million barrels last week, according to the Energy Information Administration. This decline, driven by robust export demand, indicates a tightening market in the world’s largest oil consumer.

Dollar Weakness Boosts Oil

The U.S. dollar’s weakness following the Federal Reserve’s decision to hold interest rates steady provided additional support for oil prices. A weaker dollar typically makes oil more attractive to investors holding other currencies.

Long-term Demand Concerns Persist

Despite the short-term price rally, concerns about Chinese oil demand continue to cap gains. Recent data showed manufacturing activity in China, the world’s top oil importer, contracted in July. Asia’s overall crude oil imports dropped to a two-year low last month, with China’s imports down 2.1% year-to-date compared to 2023.

Market Forecast

The short-term outlook for oil prices remains bullish, driven by geopolitical tensions and tightening U.S. supply. However, the long-term picture is less certain, with persistent worries about Chinese and broader Asian demand growth. Traders should closely monitor developments in the Middle East and upcoming economic data from major oil consumers for further price direction.

Technical Analysis

Light crude oil futures are trading higher on Thursday. Momentum is strengthening after the market crossed to the strong side of the 50-day moving average at $78.00. This is new support. Additional support levels are a pair of pivots at $77.75 and $76.89. The major support is the 200-day moving average at $75.81.

The nearest upside target is a Fibonacci level at $79.42. This level serves as both resistance and a trigger for an upside breakout.