Oil News: Futures Approach Critical $70.68 Resistance – Will Geopolitical Risks Boost Prices?

Light Crude Futures Eye Bullish Breakout as Prices Near Critical $70.68 Resistance

Light crude oil futures rose on Tuesday, with prices approaching the 50-day moving average of $70.68 per barrel. This key technical level could signal a bullish breakout if breached, with the next target being the 200-day moving average at $72.93. Currently, oil prices are stabilizing around the retracement zone of $71.63 to $69.21, while Friday’s low of $68.17 acts as a minor support. If this level fails, prices could slide further to the main bottom of $65.75.

At 09:56 GMT, Light Crude Oil futures are trading $70.51, up $0.47 or +0.67%.

Mideast Ceasefire Efforts Support Oil Prices

Oil prices have been buoyed by geopolitical risks stemming from the Middle East, particularly due to the ongoing conflict between Israel and Hamas. As U.S. Secretary of State Antony Blinken pushes for a ceasefire during his visit to the region, the market remains on edge about potential supply disruptions.

The escalation in Gaza, along with concerns about a spillover conflict in Lebanon, has kept both Brent and WTI on an upward trajectory, recovering nearly 2% on Monday after last week’s steep losses. Traders are closely monitoring any signs of further Israeli retaliation, which could lead to a larger regional conflict, potentially affecting oil output.

China’s Weakening Demand Continues to Weigh

Although Middle Eastern tensions are providing a floor for prices, weakening demand growth from China, the world’s top oil importer, remains a major concern for traders.

Despite Saudi Aramco expressing optimism about China’s future demand due to government stimulus measures, the head of the International Energy Agency (IEA) highlighted structural changes such as the electrification of China’s vehicle fleet as factors limiting future oil consumption.

These mixed signals have created uncertainty, balancing the market between supply concerns and softer demand projections.

Stronger U.S. Dollar Exerts Downward Pressure

Another bearish factor affecting crude prices is the strength of the U.S. dollar, which has been bolstered by easing inflation globally. A stronger dollar typically pressures oil prices, as it makes the commodity more expensive for buyers using other currencies.

The market is also factoring in modest U.S. interest rate cuts expected in the coming quarters, which could eventually support higher oil demand as borrowing costs decline. However, in the short term, the dollar’s resilience remains a headwind for oil prices.

Supply Outlook: U.S. Production and Inventory

On the supply side, U.S. crude oil production continues to rise, hitting a record 13.5 million barrels per day. According to a Reuters poll, U.S. crude stockpiles likely rose by 100,000 barrels last week, while gasoline and distillate inventories are expected to have declined. This steady rise in U.S. output may further weigh on prices if demand remains tepid, particularly from China and other Asian economies.

Market Forecast: Cautious Optimism with Bearish Risks

Crude oil prices are navigating between geopolitical tensions in the Middle East, sluggish Chinese demand, and a strong U.S. dollar. While short-term support from the Middle East conflict could push prices higher, traders should remain cautious.

Failure to break through the $70.68 resistance could result in a pullback toward $68 or lower, especially if China’s demand recovery falters. The market’s outlook leans bearish in the near term unless a clear breakout above the 50-day moving average occurs, which would signal strength and shift focus to the $72.93 target.