Oil News: Middle East Tensions Spark Bullish Crude Oil Outlook and Market Fears

Middle East Tensions Ignite Supply Fears

Light crude oil futures are slightly lower on Tuesday, yet remain close to Monday’s peak, the highest level since July 19. The small dip is attributed to conflicting demand forecasts from OPEC and the International Energy Agency (IEA). However, potential supply disruptions in the Middle East are keeping the market firmly supported, reflecting strong trends in both the intermediate and long-term technical indicators.

At 10:17 GMT, Light Crude Oil Futures are trading $79.98, down $0.08 or -0.10%.

OPEC’s Cautious Demand Forecast Signals Uncertainty

On Monday, OPEC cut its 2024 global oil demand growth forecast to 2.11 million barrels per day (bpd) from the previous 2.25 million bpd. This revision stems from weaker-than-expected demand in China, driven by slumping diesel consumption and economic troubles, particularly in the property sector. Despite this adjustment, OPEC’s demand growth forecast remains higher than other industry estimates, highlighting the group’s cautious approach as it prepares to potentially increase production from October.

OPEC’s latest report shows a slight increase in July production, up by 117,000 bpd, primarily led by Saudi Arabia. The group will decide next month whether to proceed with unwinding recent output cuts based on evolving market conditions.

IEA Holds Steady, But 2025 Outlook Dims

In contrast, the IEA maintained its 2024 global oil demand growth forecast, reflecting a more stable outlook. The agency, however, trimmed its 2025 estimate, citing the diminishing impact of China’s post-COVID economic recovery. The IEA also highlighted the strength of oil demand in advanced economies, particularly in the United States, where summer driving season demand is projected to be the strongest since the pandemic. Despite robust demand in the West, the IEA noted that supply cuts by OPEC+ are tightening the physical market, leading to a deficit during peak summer demand.

Geopolitical Risks Drive Bullish Sentiment

Geopolitical risks in the Middle East are adding further bullish pressure. The U.S. has increased its military presence in the region, raising concerns about potential disruptions to oil supplies. The situation follows threats from Iran and Hezbollah to retaliate against Israel, which could escalate into a broader conflict impacting oil production in the region.

Short-Term Oil Prices Poised for Gains

The combination of supply concerns in the Middle East and diverging demand forecasts from OPEC and the IEA suggests a bullish outlook for oil prices in the near term. Traders should expect continued volatility, with prices likely to remain elevated as geopolitical risks overshadow mixed demand signals. The potential for supply disruptions remains a critical factor, likely driving prices higher if tensions in the Middle East escalate further.

Technical Analysis

Light crude oil futures are approaching their highest price since July 19 on Tuesday. The market is currently trading above two key indicators:

• The 50-day moving average at $77.91
• The 200-day moving average at $75.52

This positioning gives the market a clear opportunity to challenge recent high points:

• $82.33
• $83.11

If these levels are surpassed, the next target would be the April 12 high of $84.83.

The upward price momentum is likely to continue as long as light crude oil futures remain above the 50-day moving average.