Oil Retreats After Weekly Rise in Over a Year

October 6, 2024

Key points

• Brent crude fell by 0.5% to $77.62 per barrel, while WTI crude slipped 0.5% to $74.03 per barrel.
• Last week, Brent rose over 8%, marking its biggest weekly gain since January 2023, while WTI jumped 9.1%, the most since March 2023.

Brent crude futures slipped by 43 cents, or 0.5%, to $77.62 per barrel in early Monday trade, while US West Texas Intermediate (WTI) crude dropped 35 cents to $74.03 per barrel. 

The retreat follows last week’s rally, where Brent gained over 8%, its strongest weekly rise since January 2023, and WTI saw a 9.1% rise, the largest since March 2023.

While the early dip suggests profit-taking by traders, global tensions remain a central focus.

See: Crude oil prices recover after hitting a June low, with Israel-Iran tensions and supply dynamics in focus, as seen on the VT Markets app.

After hitting a low of 65.256 in June, prices have climbed back to 74.13 as of the latest close. 

From the chart above, we see the price moving above the 30-period moving average, suggesting bullish momentum.

The MACD histogram shows an increasing divergence between the MACD and the signal line, reinforcing the upward trend.

Key levels to watch include resistance at 74.41 and support around 65.25. A break above 74.41 could lead to further gains, while failure to sustain above 74.13 may result in a pullback.

The market’s attention is fixed on Israel’s ongoing military actions against Hezbollah in Lebanon and the Gaza Strip. 

Previously: Asia Stocks Drop as Iran-Israel Tensions Rise, Crude Oil Surges on Supply Risks

Israel-Iran Conflict Drives Oil Price Surge Despite Early-Week Profit-Taking

The surge in oil prices last week was driven by fears that the conflict between Israel and Iran could escalate, raising concerns over potential disruptions to oil supply from the region. 

As Israel’s Defence Minister declared that all options are on the table, the risk of further retaliation from Iran adds complexity to the outlook. Israeli police confirmed that Hezbollah rockets hit Haifa, Israel’s third-largest city, intensifying concerns over a broader conflict.

OPEC’s spare capacity buffers against geopolitical supply risks

Moreover, recent geopolitical events have shown less influence on global oil supply due to OPEC’s large spare capacity of around 7 million barrels per day.

This spare capacity acts as a buffer, should Iranian supply be compromised.

OPEC and its allies, including Russia and Kazakhstan, have ample production capacity to offset any losses from Iran’s supply, but the situation could worsen if Iran targets its Gulf neighbours’ facilities in retaliation.

Last week’s OPEC+ meeting resulted in no changes to the current output policy, but the group is set to begin raising production from December.

Market participants should remain cautious, as the risk of disruptions remains high. If tensions escalate further, oil prices may face renewed upward pressure, although OPEC’s spare capacity could stabilise supply in the near term.

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