Crude oil prices continue to rise, reaching $77.95 yesterday, the highest level since August 30, 2024. Currently, oil prices hover around $77.50, but they remain down about 1% since the beginning of this year amid prevailing uncertainties in the oil market, which is influenced by several varying factors.
The positive factors affecting oil prices include:
- The escalation of geopolitical tensions in the Middle East, with fears of oil supply disruptions, especially as the region accounts for about a third of global supplies.
- The extension of voluntary oil production cuts by the OPEC+ alliance by 2.2 million barrels per day until the end of November this year.
- New stimulus measures taken by the authorities in China, the largest oil-importing country, to revive its economy.
However, several factors hinder this rise, the most notable of which are:
- The increase in U.S. oil inventories last week, registering 3.889 million barrels, which is higher than expectations (-1.500 million) and the previous reading (-4.471 million), marking the highest level since the end of April 2024.
- The strength of the U.S. dollar, which generally negatively affects oil prices.
- The shift in market bets that the Fed may reduce interest rates by 25 basis points instead of 50 in the upcoming Fed meeting scheduled for November 7, 2024. The markets currently price in a 68% chance of a 25 basis point cut and a 32% chance of a 50 basis point cut.
Markets are betting on a rise in crude to $100 per barrel amid increasing geopolitical risks in the Middle East. According to Citigroup, if Israel were to launch a major strike on Iranian oil facilities, it could affect 1.5 million barrels per day. In the case of a partial attack on Iranian facilities, this could result in a loss of 300,000 to 450,000 barrels per day.
From a technical perspective, crude oil prices are currently trading above the 20-day moving average (in gray) at $73.40, as well as above the 50-day moving average (in blue) at $76.15. The next challenge lies in reaching the resistance level, which is the 200-day moving average (in yellow) at $81.53 and surpassing it.
Regarding the Relative Strength Index (RSI), it has exceeded the neutral level (50 points) and currently stands at 59 points, indicating upward momentum for crude oil prices.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice. All trading involves risk.
