Oil News: Crude Prices Surge Amid Geopolitical Fears and US Economic Strength

Oil Prices Extend Gains Amid Mideast Tensions and Strong US Data

Oil prices advanced for the fifth consecutive session on Monday, supported by easing US recession concerns and escalating geopolitical tensions in the Middle East. Brent crude and West Texas Intermediate (WTI) have both seen significant gains over the past week, driven by robust economic indicators and heightened fears of potential supply disruptions.

At 10:11 GMT, Light Crude Oil Futures are trading $77.73, up $0.89 or +1.16%.

Geopolitical Risks in the Middle East

The ongoing conflict between Israel and Hamas has intensified concerns over potential retaliatory actions from Iran and its allies, including Hezbollah. The assassination of key figures from Hamas and Hezbollah by Israel has prompted fears of Iranian reprisals, which could disrupt oil supplies in the region. “The market is still waiting for Iran’s response,” said Warren Patterson, Head of Commodities Research at ING, highlighting the potential for further instability.

US Economic Data Bolsters Oil Prices

Positive economic data from the United States has further fueled the recent rally in oil prices. Last week, several Federal Reserve officials hinted at a possible interest rate cut, citing cooling inflation. Additionally, US jobless claims fell more than expected, while China’s consumer prices rose faster than anticipated in July. These developments have eased fears of a US recession, providing further support to crude oil prices.

US Rig Count Rises Slightly

In domestic news, US energy firms increased their oil and natural gas rig count for the third time in four weeks, according to Baker Hughes. Despite this, the total rig count remains significantly lower than the same period last year, reflecting the challenges posed by falling oil and gas prices, high labor costs, and a shift in corporate focus towards debt reduction and shareholder returns.

Market Outlook: Bullish on Continued Supply Risks

Given the ongoing geopolitical tensions in the Middle East and the supportive US economic data, the outlook for oil prices remains bullish. The market is closely monitoring potential disruptions in Iranian oil exports, which could lead to further price increases. Additionally, with OPEC+ set to review its production plans, any delay or reduction in planned output increases could further tighten the market, sustaining the upward momentum in crude oil prices.

Technical Analysis

Light crude oil futures are considerably higher on Monday with the market within striking distance of a resistance cluster formed by a 50% level at $77.75 and the 50-day moving average at $77.77.

Although this area could provide headwinds, given the upside momentum, it is more likely to act like a trigger point for an acceleration to the upside.

Taking out $77.77 with conviction could trigger a fast move into the minor top at $78.88, followed by the Fibonacci level at $79.42.

If sellers step in to stop the rally then look for a near-term pullback with the market well-supported by the 200-day moving average at $75.52 and a minor 50% level at $75.28.