Crude Oil Commentary - Friday, April 5

Pump Jack, Oilfield, Oil, Fuel, Industry, Petroleum

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Crude In Demand

Crude prices are on track to end the week at their highest level since mid-2023.  Fears of escalating violence in the Middle East, an improving China demand outlook, and Fed easing expectations are helping keep oil prices well supported here. On the back of an Israeli airstrike in Damascus this week which killed a senior member of the IRGC, fears of retaliation are rife.
 

Middle East Fears

The situation has been made more tense through comments from the Israeli PM that Israel will act against Iran and its proxies should it see the need, sparking concerns of a wider war emerging. Given the potential for heavy supply disruption in the area, oil prices remain vulnerable to upside shocks on any incoming headlines.
 

Improving China Outlook

Better data out of China at the start of the week has added to bullish sentiment among crude traders. With further signs of recovery in the factory sector, traders are hopeful that a continued upswing in activity will help drive demand higher. Looking ahead, any further positive data out fo China should feed into bullish price action.
 

US Jobs Next

Finally, Fed easing expectations have swung back into focus this week on the back of a weaker-than-expected services reading and some dovish Fed commentary. Fed’s Mester pointed to the likelihood of a June hike with Powell saying the Fed was close on inflation but would need more evidence. Today, US jobs data holds the key to higher prices in oil. If see any downside surprise this should fuel fresh USD weakness creating a platform for oil to push higher.
 

Technical Views

Crude

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The rally in crude has seen the market breaking out above the 82.59 level and above the bull channel highs. While above here and with momentum studies bullish, the focus is on a fresh push higher and a test of the 89.22 level next. To the downside, 77.64 and the bull channel lows remain key support to watch. 


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