Key points:
Oil prices continued to climb on Monday as escalating tensions in the Middle East sparked fears of disruptions in regional oil supplies. The conflict, centered on Gaza, saw an escalation over the weekend as Hezbollah launched hundreds of rockets and drones into Israel.
In response, Israel’s military conducted a pre-emptive strike on Lebanon using around 100 jets, aiming to thwart a larger attack.
This confrontation, one of the most intense in over ten months of border warfare, has raised concerns about a broader regional conflict that could potentially involve Iran and the United States.
Brent crude futures increased by 37 cents, or 0.5%, reaching $79.39 per barrel by 2300 GMT. Simultaneously, U.S. crude futures also saw a 0.5% rise, climbing 36 cents to $75.19 per barrel. The prospect of further escalation in the region suggests oil prices may continue their upward trajectory, with potential targets of $77.50 and $80.00.
Picture: Oil trading between 75.361 to 75.390 on the VT Markets app.
Looking at the charts, we see CL-OIL-ECN (Crude Oil) showing a strong upward movement, with prices closing at $75.361, marking a 3.32% increase.
Apart from the conflict, this rise in oil prices is driven by the growing expectation that the U.S. Federal Reserve may soon cut interest rates. On Friday, Federal Reserve Chair Jerome Powell signaled a likely start to rate cuts, a move that has boosted sentiment across the commodity complex, particularly in oil.
The chart reflects this bullish sentiment, with the price trading above key Moving Averages (5, 10, 30), which are all sloping upward. The MACD indicator also supports the bullish outlook, with the MACD line above the signal line and the histogram showing increasing positive momentum.
This may suggest that the upward trend in oil prices may continue in the near term.
Traders should monitor the resistance level around $76.956, as a break above this level could signal further gains. Conversely, any unexpected hawkish signals from the Federal Reserve or shifts in global economic conditions could introduce volatility, potentially leading to a pullback in prices. Key support levels to watch include the $74.000 area, where the price may find support if it retraces.
Easing monetary policy could continue to support higher oil prices as it may enhance global economic activity and, in turn, fuel demand.
Oil prices face pressure from economic concerns despite recent gains
However, despite the recent gains, oil prices remain under pressure from a broader pessimistic outlook on major economies, which weighed on fuel demand last week. The U.S. Energy Department’s recent purchase of nearly 2.5 million barrels to replenish the Strategic Petroleum Reserve suggests a cautious approach to managing supply risks in the current geopolitical climate.
Previously: Oil prices remain weak amid demand concerns and easing supply fears
The number of operating U.S. oil rigs remained steady at 483 last week, according to Baker Hughes’ weekly report, indicating that production levels have not yet responded to the recent price movements.
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