Crude Volatility Continues
It’s been a volatile week for crude oil with the futures market seeing heavy two-way action over the week following the initial rally we saw on Monday. Initially, oil prices surged in response to escalating tensions in the Middle East, particularly amidst reports suggesting potential US military action against Iran. The elevated risk of supply disruption linked to the escalating conflict saw crude hitting its highest level since 2021 before sellers stepped in to cap the move.
Fed & Global Growth
Mid-week, the rally was tempered as market participants assessed recent economic data and the potential for a slowdown in global growth. The broader market sentiment shifted cautiously, with growing concerns over inflation and interest rate policies, particularly from the Fed, which added to the tone of risk aversion. Despite this, crude futures remained supported overall, as attention continued to focus on supply-side dynamics.
OPEC & EIA
Ongoing production cuts from OPEC+ and weaker-than-expected output from major producers in both the US and other regions have maintained tight supply conditions, further bolstering support for crude. This was reflected in the heavily lower EIA inventories number we saw this week.
Middle East Remains Key
Looking ahead, the Israel-Iran conflict will remain the key focus point for traders with any incoming headlines showing an escalation in violence likely to drive oil prices firmly higher. Indeed, if US action looks more likely this could see crude breaking out to fresh all-time highs near-term. On the other hand, if Iran opts to negotiate or call a ceasefire, this should see oil prices cooling off.
Technical Views
Crude
The rally in crude has stalled for now into the 77.69 level and bear channel highs. Price still holds above 72.61, however, and while this acts as a floor, focus is on a further push higher. Below that level, 67.45 will be the deeper support level to watch.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.