Oil Underpinned by Middle East Tensions

Oil prices continue to tread water through the middle of the week as prices consolidate following the sharp rally seen on Friday. Tensions in the Middle East are underpinning oil prices here though, with traders awaiting fresh upside impetus, bulls have been unable to capitalise on last week’s momentum. With the IDF seemingly holding off on a full-scale ground invasion of Gaza, for now at least, markets are unsure as to how to react.

News of a hospital strike in Gaza has become the central focus for now, leading to calls from Iran to initiate a day of rage in response to the attack, which they claim was from Israel. With Israel claiming the attack was a misfired rocket from Hamas, uncertainty continues to build as Biden touches down to hold televised talks with Netanyahu.

Waiting Game

Given the volatile and highly fragile nature of the situation, tensions in the Middle East look likely to keep oil prices supported for now. With a peaceful resolution seen as a firm outside scenario at the moment, traders are awaiting the next news of any escalation in the conflict which is likely to drive fresh buying in crude.

EIA Inventories Due

Looking ahead today, we also have the EIA crude inventories release coming up which is expected to see just a 0.5-million-barrel drawdown. If this figure is any lower, this should add further support for oil prices while it would likely take a meaningful upside surprise to cause any proper selling near-term.

Technical Views

Crude

The rally in crude prices off the 82.59 level has seen the market stalling into the retest of the underside of the broken bull channel lows. Momentum studies are turning higher here, however, suggesting that while above 82.59, the focus is on a further push higher towards the 93.47 level.