Brent crude oil prices climbed to 74.55 USD per barrel by Wednesday, marking a significant increase driven by escalating geopolitical tensions in the Middle East. The previous session saw prices surge by over 2% as fears grew over potential crude oil shortages due to the intensifying conflict in the region, particularly with Iran's heightened involvement.
Iran, a key member of OPEC, holds substantial influence over global oil supplies. Its assertive stance in the Middle East conflict raises concerns about disruptions in energy exports, which could tighten the global oil market and push prices higher.
Mixed market sentiments
Despite the upward pressure from geopolitical factors, the overall sentiment in the oil market remains mixed. One of the dampening factors is the weak demand from China, the world's largest oil importer. China's sluggish economic indicators have limited the potential for a sustained recovery in oil prices, as reduced industrial activity translates to lower energy consumption.
Adding to the complex market dynamics, the American Petroleum Institute (API) reported that US crude oil inventories decreased by 1.5 million barrels during the week. This decline was less than the anticipated drop of 2.1 million barrels, marking the second consecutive weekly decrease but suggesting that demand may not be as robust as expected.
Furthermore, the appreciating US dollar has not yet significantly impacted crude oil prices but could do so in the future. Typically, a stronger dollar makes oil more expensive for holders of other currencies, potentially reducing global demand and applying downward pressure on prices.
Technical analysis of Brent crude oil
On the H4 chart, Brent crude found support at 69.90 USD, forming an upward wave targeting the 75.50 USD level. After reaching this point, a correction back to 72.66 USD is possible. Subsequently, there is potential for a new bullish wave extending to 78.20 USD, which serves as a local target. The MACD indicator technically supports this scenario; its signal line is below zero but trending sharply upwards, indicating increasing bullish momentum.
On the H1 chart, Brent broke above the 72.66 USD level and reached a local target at 75.30 USD. A consolidation range is expected to form below this level. A corrective move back to 72.66 USD (retesting from above) is possible, potentially leading to a downward exit from the consolidation. Once this correction is completed, the price may resume upward towards 75.50 USD, the initial target. The Stochastic oscillator technically confirms this Brent outlook, with its signal line below the 80 level and preparing to decline, suggesting a short-term correction before further gains.
Conclusion
The interplay of escalating geopolitical tensions and mixed economic signals continues to influence Brent crude oil prices. While concerns over supply disruptions due to Middle Eastern conflicts push prices upward, weak demand from China and inventory data from the US temper this rise. Additionally, the strengthening of the US dollar could impact global oil demand in the near future. Traders and investors should closely monitor these factors, as they will likely contribute to continued volatility in the oil market.
By RoboForex Analytical Department
Disclaimer
Any forecasts contained herein are based on the author's particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.