Middle East Impact

Crude oil prices are looking more tentative across early trading on Tuesday. This follows a fresh push higher yesterday driven by heightened uncertainty linked to the ongoing conflict in the Middle East. Fears of a wider conflict developing out of Israel – Iran tensions remain a key driver of upside price action in crude prices currently.

Iran- Israel Fears

Tit-for-tat attacks between the two sides remain a key threat to stability in the region with speculation that the US and UK could be sucked into the conflict if Iran and Israel begin engaging directly. With the situation still highly volatile, oil prices will remain sensitive to incoming headlines regarding the situation with news of an escalation in violence likely to drive prices sharply higher.

USD Developments

Away from the Middle East, oil prices are also being supported by a weaker US Dollar. Fresh downside in the greenback following dovish comments from Fed’s Powell on Friday has helped underpin support for crude. USD looks vulnerable to further downside over the coming months as the Fed easing cycle begins. In this scenario, oil prices should rally as demand grows.

EIA On Watch

Looking ahead this week, focus will be on the next set of EIA inventories data tomorrow. Following the prior week’s almost 5-million-barrel drawdown, oil prices could find renewed support this week if we see a further drop in commercial crude levels.

Technical Views

Crude

The rally off the 72.61 level in crude has stalled for now into the 77.64 level. However, with momentum studies bullish, focus is on a continuation higher here with the bear channel highs and the 82.59 the next objective for bulls. 72.61 remains key support for now.