WTI Crude Oil Rises Toward $71 Amid Middle East Tensions and Supply Concerns

WTI crude oil futures edged higher toward $71 per barrel on Thursday, marking the third consecutive session of gains. The upward momentum is primarily driven by rising geopolitical risks in the Middle East, a critical region that accounts for nearly one-third of the world’s oil production.

Recent missile attacks by Iran on Israel, coupled with Israel’s pledge to retaliate, have raised concerns over potential disruptions to production facilities and key supply routes in the region. These tensions are heightening fears of instability in global oil markets.

#Crude prices move up 4%+ over the last couple of days, due to the #Israel–#Iran conflict. pic.twitter.com/CfEDZMZSvr

— Arjun G Nagarajan (@arjungn80) October 3, 2024

Meanwhile, the latest data from the U.S. Energy Information Administration (EIA) added another layer of complexity to the market outlook. Crude oil inventories increased by 3.89 million barrels, a figure significantly above expectations, while gasoline demand dropped to its lowest level in six months.

This suggests a softening in consumer demand, which could temporarily ease concerns about supply shortages. However, the potential for production disruptions in the Middle East remains a dominant factor in driving prices higher.

Supply Dynamics and OPEC+ Production Plans

Despite the recent price surge, there are signs of ample supply in the market. OPEC+ has announced plans to restore some of its previously halted production capacity, with increases scheduled to begin in December following a two-month delay.

The decision signals that the coalition does not foresee any immediate supply shortages, despite the current geopolitical uncertainties. This restoration of capacity may provide a buffer against potential disruptions, stabilizing global oil availability.

Moreover, U.S. shale producers are continuing to pump at elevated levels, which is further offsetting any potential shortfall. The market is closely watching for any shifts in OPEC+ policies, especially in light of evolving geopolitical developments.

Technical Analysis: Key Levels to Watch

On the technical front, WTI Crude Oil is currently trading at $71.01, consolidating after a recent rebound.

The price has found support at the 38.2% Fibonacci retracement level of $70.05, suggesting that buyers are stepping in to defend this key level.

Immediate resistance is seen at $71.64, followed by stronger resistance levels at $72.37 and $73.35.

🔰Oil sizzles from 33-month low on Israel-Iran war, Brent up 3% to $74; China demand, US inventories limit gains 🔰

❇️Brent crude futures had hit a multi-month low ahead of the Israel-Iran war due to demand concerns and an oversupply in market due to OPEC's output hike.… pic.twitter.com/XwQrQn0xE2

— 𝓜𝓲𝓼𝓱𝓽𝓲✨ (@Mishti2212) October 3, 2024

Technical indicators present a mixed outlook. The Relative Strength Index (RSI) stands at 56.78, reflecting a neutral stance with no clear overbought or oversold signals.

The 50-day Exponential Moving Average (EMA) is positioned at $69.89, acting as a critical support level. If prices hold above this level, bullish momentum may continue to build in the near term.

Key Insights:

• Middle East Geopolitical Risks: Recent tensions could disrupt supply chains, pushing prices higher.
• EIA Inventory Report: A 3.89 million barrel increase in crude stocks contrasts with weakening gasoline demand.
• Technical Support at $70.05: Holding above this level is key for further bullish momentum.

Conclusion

The ability of WTI Crude Oil to maintain support above $70.05 will be crucial in determining its short-term direction.

A move above $71.64 could open the path to higher targets at $72.37 and $73.35.

Conversely, a drop below $68.64 could signal a bearish reversal, turning the focus back to potential downside risks.