Oil Prices Forecast: Poised for Bullish Breakout Amid Mid-East Tensions

Key Points

• Israel-Hamas Tensions Boost Oil Prices
• Russia’s Oil Exports Challenge OPEC+ Agreement
• China’s Economic Woes Impact Oil Demand

Middle East Tensions and Global Supply Factors Influence Oil Prices

This week’s crude oil market has been notably influenced by heightened tensions in the Middle East and key developments in global oil supply, particularly concerning Russia’s production and export levels.

On Friday at 07:20 GMT, Light Crude Oil Futures are trading $76.18, down $0.04 or -0.05%.

Middle East Tensions Elevate Prices

Israel’s rejection of a ceasefire with Hamas has escalated regional tensions, directly impacting oil prices. The heightened geopolitical risk has prompted traders to adjust their risk assessments, contributing to a significant rise in oil prices. Both Brent and WTI are poised for a weekly gain exceeding 5%.

Global Supply Considerations

Alongside the Middle East situation, global supply factors are playing a crucial role. Notably, non-OPEC countries like Norway and Guyana are ramping up output. However, the spotlight is on Russia due to recent incidents affecting its oil refineries.

Russia’s Oil Export Surge

Damages from drone attacks and technical issues have led Russia to export more crude than planned, potentially straining its commitment to the OPEC+ output reduction agreement. Despite agreeing to cap production at 9.5 million barrels per day and reduce exports, Russia’s actual export figures have been higher.

This surge is particularly evident with increased loadings from ports like Primorsk, Ust-Luga, and Novorossiisk. The ongoing refinery issues, including significant damages at the Tuapse refinery, suggest that Russia might struggle to meet its OPEC+ obligations, impacting the global oil market.

China’s Economic Influence

Additionally, economic concerns in China, a major crude importer, are exerting pressure on oil prices. Recent weak performances in China’s equity markets and surprising CPI figures have contributed to a cautious market sentiment.

Short-term Market Forecast

Considering these factors, the oil market is expected to remain volatile. The combination of geopolitical risks and supply shifts will likely keep prices on a bullish trend in the short term. However, traders should stay alert to changes in geopolitical scenarios and global economic indicators that could sway the market.

Technical Analysis

Light crude oil futures maybe trading flat early Friday, but its relative position to the 200-day moving average at $76.35, has the market poised for a breakout to the upside and a change in the long-term trend to up.

A sustained move over $73.35 will indicate the presence of buyers with potential near-term targets coming in at $77.43 and $79.29. The latter is actually a potential trigger point for an acceleration to the upside.

The inability to overcome the 200-day moving average won’t be a bearish signal per se, but it could trigger a pullback into support at $73.35, the 50-day moving average.