Oil Prices Forecast: Traders Tense as Israel-Gaza Conflict Amplifies Supply Worries

Highlights

• Brent and WTI futures gain on geopolitical risks
• Supply cuts from Saudi Arabia and Russia tighten market
• Short-term forecast for oil markets leans bullish

Overview

Oil markets are bracing for turbulence as escalating Israel-Gaza tensions compound supply concerns. Brent and U.S. West Texas Intermediate (WTI) futures posted gains, fueled by geopolitical anxieties and supply-demand dynamics.

Geopolitical Risks

Brent crude touched $93.32 a barrel, rising 1%, while WTI was up 1.6% at $90.78 per barrel as of 05:04 GMT on Friday. The Israel-Gaza conflict is stoking fears that hostilities may widen across the Middle East, a region crucial for oil production. Israeli Defence Minister Yoav Gallant’s recent comments further amplified concerns about a looming ground invasion of Gaza. Additionally, missile interceptions by the U.S. in Yemen toward Israel ratchet up regional tension, elevating crude oil risk premiums.

Supply Cuts and Low Inventories

Beyond geopolitical events, supply cuts from top producers like Saudi Arabia and Russia are keeping the market tight. These cuts, slated to extend through year-end, are supporting oil prices alongside dwindling inventories, particularly in the United States. Washington aims to purchase 6 million barrels for its Strategic Petroleum Reserve in December and January, underscoring the urgency to bolster emergency stockpiles.

Other Market Influences

Though the U.S. temporarily lifted sanctions on OPEC member Venezuela, this policy shift hasn’t assuaged market worries. OPEC+ sources suggest that any increase in Venezuelan production would likely be gradual, offering limited immediate relief to the tense oil markets.

Short-term Forecast

Given the escalating geopolitical risks and supply constraints, the short-term outlook for oil markets is bullish. WTI could aim for late-September highs of $95.03 a barrel if it breaks resistance at $92.48, suggesting the road ahead is paved for further gains.

Technical Analysis

Light Crude Oil Futures are trading at $89.33, which is above both the 50-day moving average of $85.79 and the 200-day moving average of $77.97. The asset is also slightly higher than the previous daily close of $88.37.

With the minor support at $88.21 and main support at $83.68 acting as strong floors, and minor and main resistance levels at $92.49 and $97.67 respectively, the market is bullish in the short term.