Crude at Highs

Oil prices are back in the spotlight this week with crude futures having broken out to fresh YTD highs yesterday. Heightened geo-political risks linked to escalating conflict in the Middle East, OPEC supply cuts and better data out of China are helping to drive bullish sentiment currently. Crude prices are currently sitting around 24% up off the YTD lows and looked poised for further gains given the current backdrop.

Middle East Impact

Fears of retaliation from Hezbollah and Iran-backed militants against Israel, following the killing of a top commander during an airstrike on the Iranian embassy in Syria, are a major concern this week. The killing of foreign aid workers by Israel in Gaza has prompted growing criticism from Western governments, highlighting concerns that the conflict is showing no sign of stopping. As such, risks of escalated disruption to shipping routes are also feeding into higher oil prices.

OPEC On Watch

OPEC+ meets today for an online review of its output policy. According to Reuters, OPEC sources are expecting no shift in policy today following the recent agreement to extend current output cuts. However, markets will be keenly scrutinising details of the meeting for a view on whether policy is likely to change again in coming months.

Better China Data

Finally, stronger-than-forecast China factory data at the start of the week is prompting optimism that activity is on the rise here. With the outlook demand for oil seen creeping higher as a result, any further data upside should help keep oil prices well-supported.

Technical Views

Crude

The rally in crude prices has seen the market breaking out above the bull channel highs and the 82.59 level. While above here, focus is on a continuation higher towards the 89.22 level next. To the downside, below 82.59, 77.64 and the bull channel lows will be next support to watch. 

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