Crude Rally Continues

Crude prices are continuing to climb midweek with the futures market up around 2.5% on the week and almost 7% off the month’s lows. Continued weakness in USD is helping feeding into better demand for crude while fresh violence in the Middle East and growing uncertainty over the situation there is driving bullish sentiment also.

Middle East Fears

Recent missile attacks from Israel in Lebanon and Gaza means that the ceasefires with both Hezbollah and Hamas are at risk of collapse, risking an escalation of the conflict. Meanwhile, US attacks on Houthi rebel sites in Yemen and threats against Iran mean that there is a building risk of direct Iranian involvement too. With this situation in a very precarious place, oil prices look likely to continue higher near-term as supply risks remain elevated.

Tariffs & Sanctions

Oil prices are also being squeeze this week following the US government’s announcement of 25% tariffs against any countries buying Venezuelan crude. This comes on the back of the government increasing its sanctions against Iran a week prior, creating significant tightening in the global market, reflected in the higher prices we’re seeing this week.

EIA On Watch

Looking ahead this week, traders will be watching the latest EIA inventories data due later today. The market is looking for a fresh surplus of 1.5 million barrels, reflecting the ongoing weaker demand environment in the US. Given the broader backdrop, if we see any downside surprise this should help drive fresh buying through the back end of the week.

Technical Views

Crude

Crude continues to recover further above the 67.45 level. With momentum studies pushing higher, focus is on a test of the 72.61 level next and the bear channel highs above. To the downside, 63.83 is the key support to watch if we break current lows.