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Further Supply Disruption in the Middle East 

Oil prices remain bid today on the back of a more than 5% rally in crude futures yesterday. Developments in the Middle East are creating upward pressure this week as fears of a burgeoning, wider conflict in the region are acting to offset oversupply concerns. News of fresh supply disruptions in the Middle East linked to protestors forcing the temporary closure of an oil field in Libya has added to traders’ concerns. Ongoing unrest in the Red Sea, impacting crude distribution, has seen oil prices creeping higher in recent days, alongside news of a terrorist attack in Iran and the killing of Hamas’ deputy leader in Beirut.

Shifting Perspective

With the situation in the Middle East looking highly precarious, oil prices appear vulnerable to upside price shocks near-term.Any further news regarding an intensification of violence in the region will certainly drive speculative buying action.A main driver behind the sell off in crude over Q4 2023 was the perception that a wider Middle East conflict would likely be avoided. However, if the market starts to shift its view on this, crude has plenty of room to rally.

EIA Up Next

Away from the Middle East, focus will be on the first EIA release of the year due later today.The market is expecting a more than 3-million-barrel drawdown, on the back of the prior week’s 7 million barrel. If seen this should add to bullish sentiment in crude into next week.

Technical Views

Crude

The latest test of the 66.79 multi-year support has seen the area holding once again. Price is now attempting to break back above the 72.61 level and the bear channel highs. With momentum studies bullish, back above that level will see focus shifting to 77.64 as the next bull objective. 

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