Global crude oil prices extended gains on Wednesday, following escalating conflict in the Middle East. Benchmark Brent crude oil was at $75.67 per barrel after rising by 1.6 percent, while West Texas Intermediate (WTI) was up by 3.4 percent to trade at $72.25. That was the first successive daily gain by oil price since mid-September, pointing to the suppressed demand for the world’s most traded commodity.
Oil prices had largely ignored the year-old Middle East war as a weak global demand outlook offset the geopolitical risk premium. However, Iran’s attack of Israel on Tuesday has elevated the prospect of potential Brent crude supply constraints, with the Staight of Hormuz potentially being drawn into the conflict.
Located between Iran and Oman, on the Persian Gulf, the Straight is responsible for the transit of 20 percent of global oil. Therefore, a widescale war could potentially disrupt supplies. Also, Israel could retaliate against Iran, and such a move could include targeting Iranian oil infrastructure.
However, the downside to oil prices is the low demand from China. The world’s second-largest economy announced a stimulus program recently, but that has not yet picked momentum. Also, Saudi Arabia has reportedly warned that it could increase its output if some OPEC+ members continue to violate agreed supply quotas. That could add downward pressure to Brent crude price.
Brent crude oil price is on a bullish momentum and the upside will likely prevail above the 74.65 pivot. With the bulls in control, look for the first barrier at 75.24, but a stronger upward momentum could break above that barrier to test 76.79. On the other hand, a move below 74.65 will signal bearish momentum, with the first support likely to come at 74.12. Extended bearishnes could break below that mark to invalidate the upside narrative and test 73.50.
This post was last modified on Oct 02, 2024, 16:13 BST 16:13