Oil prices have rebounded from eight-month lows

Crude oil prices have rebounded sharply from recent lows this week, driven by a strong combination of geopolitical risks, tightening supply and improving economic indicators. Both the Brent and WTI benchmarks posted gains for three consecutive sessions, marking a significant return from Monday’s lows.

Conflict in the Middle East is causing supply concerns

The specter of escalating conflict in the Middle East has emerged as a primary catalyst for oil’s upward movement. Recent assassinations of senior members of Hamas and Hezbollah have heightened fears of Iranian retaliation against Israel. This tension raises the possibility of supply disruptions from the world’s most critical oil-producing region. The market remains on edge, with traders closely monitoring developments that could spark a wider regional conflict.

Libya’s production troubles add to the supply squeeze

Exacerbating supply concerns, Libya’s National Oil Corporation declared force majeure at its Sharara oil field due to protests. This unexpected outage removes a significant amount of oil from the market, with Sharara’s 300,000 bpd capacity now offline. The reduction in Libyan production further tightens global supply, providing further support to prices.

U.S. inventory draw signals strong demand

A substantial drop in US crude inventories reinforced the bullish sentiment. The Energy Information Administration reported a cut of 3.7 million barrels last week,…

Crude oil prices have rebounded sharply from recent lows this week, driven by a strong combination of geopolitical risks, tightening supply and improving economic indicators. Both the Brent and WTI benchmarks posted gains for three consecutive sessions, marking a significant return from Monday’s lows.

Conflict in the Middle East is causing supply concerns

The specter of escalating conflict in the Middle East has emerged as a primary catalyst for oil’s upward movement. Recent assassinations of senior members of Hamas and Hezbollah have heightened fears of Iranian retaliation against Israel. This tension raises the possibility of supply disruptions from the world’s most critical oil-producing region. The market remains on edge, with traders closely monitoring developments that could spark a wider regional conflict.

Libya’s production troubles add to the supply squeeze

Exacerbating supply concerns, Libya’s National Oil Corporation declared force majeure at its Sharara oil field due to protests. This unexpected outage removes a significant amount of oil from the market, with Sharara’s 300,000 bpd capacity now offline. The reduction in Libyan production further tightens global supply, providing further support to prices.

U.S. inventory draw signals strong demand

A substantial drop in US crude inventories reinforced the bullish sentiment. The Energy Information Administration reported a cut of 3.7 million barrels last week, far exceeding analysts’ expectations for a 700,000-barrel decline. It marked the sixth straight week of declines, pushing US crude stockpiles to six-month lows. Steady inventory reductions point to robust physical demand, contradicting broader economic concerns.

Refineries adjust production as market conditions change

Major U.S. refiners, including Marathon Petroleum, Valero Energy and Phillips 66, have announced plans to cut production in the third quarter, according to Reuters’ John Kemp. This strategic move aims to address weaker profit margins and include scheduled maintenance. By cutting supply, refiners hope to boost margins in the face of falling fuel demand as the summer season winds down.

Economic data eases recession fears

Positive economic indicators in the United States helped ease some concerns about a potential recession. The number of Americans filing new jobless claims fell more than expected last week, suggesting the labor market remains resilient. This data point counters recent concerns about economic weakness and supports the case for sustained oil demand.

OPEC+ production decisions are big

While not directly affecting this week’s price movements, the market remains in tune with OPEC+ production plans. The group’s recent decision to maintain its strategy of phasing out voluntary production cuts since October continues to weigh on market sentiment. Traders weigh the potential increase in supply against current demand forecasts and geopolitical risks.

Weekly light crude oil futures

Trend indicator analysis

The main trend is up, but the new lower secondary top at $83.11 is a sign of a bearish trend. A trade through this level and $84.83 will reaffirm the uptrend. The main trend will change down to a move of $70.67.

As of Thursday’s close, the market is trading higher for the week, putting it in position to record a reversal low and end a four-week losing streak.

The minor range is from $70.67 to $83.11 with a pivot at $76.89. The short-term range is $84.83 to $70.67 with a pivot at $77.75. The two pivots form an area of ​​potential resistance.

The strongest retracement zone from $74.60 to $72.19 is solid support. Essentially, it controls the short-term direction of the market, providing hope for the bulls and a potential trigger point for a steep decline for the bears.

The low of the week is $71.67. It dipped slightly below the retracement zone and in front of the main bottom at $70.67 before reversing higher. This week’s price action clearly indicates that traders believe that $72.19 to $70.67 is a value zone.

Weekly technical forecast

The direction of the weekly light crude oil futures market at the end of the week of August 16 will likely be determined by the trader’s reaction to $74.60.

Optimistic scenario

A sustained move above $74.60 will signal the presence of strong buyers. If this creates enough short-term momentum, then we could see a move from $76.89 to $77.75. A breach of the latter could trigger an upward acceleration, with $83.11 the initial price target, followed by $84.83.

Bearish scenario

A sustained move below $74.60 will indicate the presence of sellers. If it generates enough downward momentum, then we could see a retest of the $71.67 to $70.67 range. If the main bottom at $70.67 fails to hold, then look to the downside.

Forecast: The optimistic moment will continue

Looking ahead to next week, the oil market looks poised for further gains. The convergence of tightening supply, geopolitical risks and improving economic data is creating a favorable environment for price appreciation.

Geopolitical tensions in the Middle East are likely to remain the main driver of market sentiment. Any escalation or concrete signs of Iranian retaliation could trigger sudden price increases. Traders should closely monitor diplomatic efforts and military movements in the region.

Ongoing production issues in Libya and potential weather-related disruptions in the Gulf of Mexico could further constrain global supply. With US inventories already at six-month lows, any additional supply shocks could exacerbate market tightening.

The release of economic data will play a crucial role in shaping demand expectations. Positive indicators in major economies, particularly China and the United States, could reinforce the bullish narrative. Conversely, any sign of economic weakness could temper price gains.

Technical factors also support a continued upward move. Recent price action on the daily chart has crude oil futures slightly on the strong side of the critical 200-day moving average at $75.56. A decisive break above this level could trigger additional buying interest and accelerate the rally. On the weekly chart, buyers stepped in when the market tested a value zone between $72.19 and $70.67.

Given these factors, crude oil (WTI) futures are likely to test between $76.89 and $77.75, the latter being a potential trigger point for an upward acceleration. However, traders should remain alert to sudden changes in geopolitical developments or unexpected economic data that could alter this outlook.

In conclusion, the oil market has regained its bullish stance, supported by a combination of supply constraints, geopolitical risks and improving demand outlook. As these factors continue to evolve, crude oil prices are well positioned to extend their recent gains in the coming week.