Oil News: Geopolitical Tensions Send Oil Prices Soaring Over $2

Geopolitical Tensions Boost Oil Prices

Oil futures surged by over $2 a barrel on Wednesday, recovering from recent seven-week lows. This rebound follows the assassination of Hamas leader Ismail Haniyeh in Iran, which escalated tensions in the Middle East. The heightened geopolitical risk has provided a temporary boost to oil prices, countering concerns about weak demand from China.

At 10:31 GMT, Light Crude Oil futures are trading $76.65, up $1.92 or +2.57%.

Recent Downtrend in Oil Prices

On Tuesday, both Brent and WTI crude fell by about 1.4%, closing at their lowest levels in seven weeks. The market had been under pressure due to fears of slowing demand from China, the world’s largest crude oil importer. China’s manufacturing activity contracted for the third consecutive month in July, according to official surveys, which weighed heavily on oil market sentiment.

Middle East Geopolitical Risks

The killing of Haniyeh came a day after Israel claimed responsibility for the death of Hezbollah’s top commander in Beirut, following a rocket attack on Israel. Additionally, the United States conducted a strike in Iraq, further heightening regional tensions. While these developments have led to a spike in oil prices, analysts caution that unless critical oil and gas infrastructure is impacted, the price increase may be short-lived.

OPEC+ Meeting and Production Outlook

Despite the current geopolitical turmoil, oil prices are on track to post their largest monthly loss since October 2023. This is largely due to ongoing concerns about China’s demand and expectations that OPEC+ will adhere to its existing production agreement. The Joint Ministerial Monitoring Committee (JMMC) of OPEC+ is scheduled to meet online on Thursday to discuss future production levels and potential adjustments.

US Inventory Data

In the United States, crude, gasoline, and distillate inventories fell last week, according to figures from the American Petroleum Institute (API). The Energy Information Administration (EIA) is set to release its data at 14:30 GMT on Wednesday, with analysts forecasting a decline of 1.1 million barrels in crude inventories for the week ending July 26.

Market Forecast

Given the current geopolitical tensions in the Middle East, oil prices may experience further short-term volatility. However, without a significant impact on oil and gas infrastructure, the recent price surge is likely to be temporary. The ongoing concerns about China’s demand outlook and the upcoming OPEC+ meeting will be crucial factors influencing oil prices in the near term. Overall, the market outlook remains bearish due to persistent demand concern.

Technical Analysis

Light crude oil futures are bouncing back after finding support at a key 50% level at $74.61. Prices accelerated after the market overcame the 200-day moving average at $75.83, which could become support.

The market is now facing a series of resistance levels at $76.89, $77.75 and the 50-day moving average at $77.96.

Conflicting fundamentals could create a rangebound trade with the 200-day moving average support and the 50-day moving average resistance.