Oil Markets in Focus as US-Saudi Tensions Rise

Oil prices jumped on Monday before later surrendering gains as rising tensions between the United States and Saudi Arabia weighed on investor sentiment.
Lukman Otunuga

Open your FXTM account today

Oil prices jumped on Monday before later surrendering gains as rising tensions between the United States and Saudi Arabia weighed on investor sentiment.

U.S President Donald Trump threatened “severe punishment” for Saudi Arabia if they were responsible for the disappearance of a Saudi Journalist. With Saudi Arabia vowing to “respond with greater action” against any US sanctions, fears immediately heightened over the kingdom cutting production. Although oil prices seem to be trading lower today amid the risk-off mood, the outlook points to further upside.

Rising geopolitical tensions in the Middle East coupled with looming US sanctions against Iran are two likely factors to push oil prices higher by year end.

Geopolitical risk factors may create uncertainty over the global supply outlook ultimately fuelling fears of possible supply shocks. If the situation concerning the disappearance of a Saudi journalist escalates and Trump ends up imposing economic sanctions against Saudi Arabia, oil prices are seen appreciating sharply. The aggressive upside is based on the notion of Saudi Arabia retaliating by reducing oil supply, at a time where the U.S. will be imposing sanctions on Iran’s oil exports.

While the current market conditions and geopolitical developments currently favor higher oil prices, global trade tensions still remain a threat to upside gains down the road. Escalating trade disputes present a significant threat to global growth and stability. If a full-blown trade war becomes reality, global growth could take a hit consequently crippling demand for crude.

In regards to the technical picture, WTI Crude is under pressure on the daily charts with prices trading marginally below $80.00 as of writing. Sustained weakness below this level could send prices towards $78.20 and $77.50, respectively. For short-term bulls to jump back into the game, WTI Crude needs to secure a daily close back above $81.00.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US