Key points:
Oil prices held steady in early Wednesday trading as the market reacted to evolving dynamics in the Middle East and concerns over softening demand.
Brent crude futures rose by 0.3% to $77.40 a barrel, while U.S. WTI futures inched up by 14 cents to $73.71.
These movements followed Tuesday’s steep 4% decline, prompted by talks of a Hezbollah-Israel ceasefire, which caused traders to step back from risk-on positions.
Market analysts are keeping a close watch on the geopolitical landscape, particularly the possibility of escalations involving Iran’s oil infrastructure.
Priyanka Sachdeva of Phillip Nova noted the constant back-and-forth in sentiment driven by headlines, stating that markets have become distracted from core fundamentals such as supply and demand outlooks.
Picture: Crude oil consolidates near $73.94, with mixed signals from moving averages and MACD, as traders await direction around key levels, as seen on the VT Markets app.
Crude oil closed at 73.941 after opening at 73.822, showing minimal movement with a rise of just 0.16%. The price peaked at 74.251 before retreating and finding support near 72.691, indicating a session of consolidation after recent volatility.
The moving averages (5, 10, and 30-period) reveal mixed signals. While the price briefly touched above the shorter-term moving averages earlier in the session, it has since fallen back below them, suggesting the market lacks clear direction in the short term.
The MACD (12, 26, 9) also reflects this indecision, with the MACD line hovering near the signal line and the histogram showing minimal movement. This indicates a lack of strong momentum either way.
Support is evident around 72.691, where buyers stepped in to prevent further declines. If the price breaks below this level, the next support could be around 72.000.
On the upside, resistance is seen near 74.441, a key area that, if broken, could signal a potential reversal to the upside.
The technical picture of crude oil suggests a phase of consolidation, with no clear momentum for a significant move in either direction.
Traders may need to monitor the upcoming sessions closely for stronger signals, especially as the price continues to hover near key support and resistance levels.
The U.S. Energy Information Administration (EIA) recently reduced its forecast for global oil demand growth by 20,000 barrels per day, citing weaker industrial production in both the U.S. and China.
This downgrade, combined with data showing U.S. crude stocks increased by nearly 11 million barrels last week, dampened bullish sentiment despite the geopolitical risks.
The rise in stockpiles was much larger than analysts had expected, leading to increased speculation that demand is not strong enough to support prices in the near term.
At the same time, China’s lack of additional fiscal stimulus continues to weigh on the market.
IG market strategist Yeap Jun Rong highlighted that many participants were disappointed by the absence of fresh measures from Beijing to boost the economy, which further limited gains in the oil markets.
Looking ahead, traders will be watching for developments in Middle Eastern tensions as well as updates on U.S. crude stocks and global demand forecasts to gauge the next moves for oil prices.
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