Crude oil prices ticked higher on Thursday, August 8, after positive US job data indicating a growing US economy eased some of the fuel demand concerns. Escalating tensions in the Middle East also helped prices bounce back for a third straight session after hitting an eight-month low on Monday.

Brent crude futures rose 57 cents or 0.73 per cent to $78.90 a barrel. US West Texas Intermediate crude rose 87 cents, or 1.16 per cent, to $76.10. Oil prices were buoyed on Thursday after data showed the number of Americans filing new applications for unemployment benefits fell more than expected last week, suggesting fears the labour market is unravelling were overblown.

Oil rebounds 3% from multi-month lows on MidEast tensions, US crude stock draw; Brent nears $79/bbl

What's driving crude oil prices?

-Investors also digested a 3.7 million barrel drop in US crude inventories last week, as reported by the Energy Information Administration (EIA) on Wednesday. This drop far exceeded analysts' expectations and marked a sixth straight weekly decline to six-month lows. 

-Elsewhere, the killing of senior members of militant groups Hamas and Hezbollah last week raised the possibility of retaliatory strikes by Iran against Israel, stoking concerns over oil supply from the world's largest producing region.

-Analysts say oil prices will spike if Iran retaliates on a large scale. Also lending some support, Libya's National Oil Corporation declared force majeure at its Sharara oilfield on Tuesday, a statement added that the company had gradually reduced the field's production because of protests.

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-Analysts at Citi said there was a possibility of a bounce in prices to the low to mid-$80s for Brent. "Upside risks in the market remain, from still-tight balances through August, heightened geopolitical risks across North Africa and the Middle East, the possibility of weather-related disruptions through hurricane season and light managed money positioning," said Citi.

Where are prices headed?

Analysts said that WTI Crude oil rallied nearly three per cent yesterday, closing above $75 per barrel, driven by escalating geopolitical tensions in the Middle East and a decline in US crude stocks. 

‘’Ongoing protests in Libya have disrupted oil production, leading to the shutdown of the country's largest oil field, Sharara. Today, WTI Crude holds its sharp gains from yesterday, trading above $75.50 per barrel amid concerns about a potential retaliatory strike by Iran against Israel,'' said Kaynat Chainwala, AVP-Commodity Research, Kotak Securities.

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Concerns over supply tightness from Venezuela and Libya are also supporting oil prices. Venezuelan President Nicolás Maduro was declared the winner of a controversial presidential election, which has sparked nationwide protests and may prompt the US to consider imposing fresh sanctions. 

‘’Chinese oil imports in July fell once again, reaching their lowest levels since September 2022, due to sluggish manufacturing and industrial activities, which could limit gains in crude oil prices. We expect crude oil prices to remain volatile. Crude oil has support at $73.80-$73.00 and resistance at $75.10-$75.80. In INR, crude oil has support at ₹6,265- ₹6,190 and resistance at ₹6,410- ₹6,480,'' said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.