Brent Oil Hits Five-Month High
On Friday morning, Brent oil hit a new five-month high, reaching over $90 per barrel. This spike is attributed to a combination of heightened geopolitical risk, tightening supply, and increased demand in key economies.
Vladimir Zernov, an analyst at FXempire, predicts that if Brent oil stays above the $90 per barrel level, it will likely head towards the resistance at $95-$96 per barrel. This forecast suggests that the market will continue its bullish momentum in the coming weeks.
Rising Tensions in the Middle East
One of the major factors contributing to the bullish trend in the oil market is the rising geopolitical tension in the Middle East. This week, pressure in the region heightened further following controversy over a fatal Israeli strike on aid workers in Gaza. In response, US President Joe Biden warned Israeli Prime Minister Benjamin Netanyahu that the humanitarian situation was unacceptable.
This attack came after an Israeli attack on Iran's embassy, raising the risk that Iran, an OPEC member, will become more involved in the conflict. The escalating tensions in the Middle East are fuelling concerns about potential disruptions to oil supply from the region, which is a key global oil producer.
Figure 1 : An Israeli tank is on the move after a group of Hamas gunmen infiltrated from the Gaza Strip.
Output Cuts by OPEC+
Another significant factor contributing to the tightening supply and bullish trend in the oil market is the output cuts by the OPEC+ cartel. In a meeting on April 3rd, OPEC+ leaders and its allies, led by Russia, decided to maintain their current oil supply policy. This includes voluntary cuts of 2.2 million barrels per day until at least the end of June.
The decision to continue with the output cuts reflects OPEC+'s commitment to stabilizing the oil market and supporting oil prices amid the ongoing geopolitical turmoil and uncertainties.
Summary and Future Outlook
In summary, the current trends indicate that the oil market will likely maintain its bullish momentum in the coming weeks. The unresolved tensions in the Middle East raise concerns that more countries could get involved, and the conflict might escalate further. However, some experts suggest that the new ceasefire negotiations in Cairo could prove fruitful in terms of de-escalating the war.
Any significant changes in the geopolitical landscape or OPEC's policies could have a profound impact on oil prices and the overall oil market.
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