Crude oil has traders pondering the way forward after a tense weekend

• Crude oil bounces back on Monday but is holding strong above the $67.00 support area.
• Geopolitical tensions are rising further after the escalation of attacks in Lebanon over the weekend.
• The US dollar index is holding close to annual lows ahead of Fed Chairman Powell’s speech on Monday.

Oil is lower at the start of the week despite Israel’s stepped-up attacks on Lebanon over the weekend. Oil prices are generally expected to rise this week, with Chinese measures expected to boost oil demand in the region. On Sunday, the People’s Bank of China (PBoC) and the National Financial Regulatory Administration introduced additional measures, with lower mortgage rates aimed at boosting the real estate sector.

The US Dollar Index (DXY), which tracks the greenback’s performance against six other currencies, is set for a busy week of economic indicators on manufacturing and services activity and employment, concluding on Friday with the monthly release of non- US agricultural, although geopolitical. tensions are the main theme. Tensions have risen in Lebanon, where Israel has continued to bomb several parts of the country and could see Iran begin to get involved in the conflict.

At the time of writing, crude oil (WTI) is trading at $67.80 and Brent at $71.45.

Oil and markets news: Iran on the brink of intervention

• After Israel launched airstrikes against Houthi targets in Yemen and Hezbollah targets in Lebanon, the risk of a wide war in the Middle East is starting to rise, reports The Wall Street Journal.
• On Monday, Bloomberg reported that the amount of crude oil held worldwide on tankers that had been stationary for at least seven days rose to 60.76 million barrels on September 27, which was 27% lower than a year ago and could indicate a rise in demand.
• Russia is stepping up its attacks on Ukraine’s key energy grid and power plants, with even the Zaporizhzhia nuclear power plant under attack, Reuters reports.
• Warren Patterson, Head of Commodity Strategy at ING Groep NV in Singapore, expressed concern about more upside for the oil market. “The oil market has become increasingly numb to developments in the Middle East,” Patterson said, noting the lack of impact on supply, Bloomberg reports.

Oil Technical Analysis: Iran Will Hold Cards Here

Crude oil prices could still rise if geopolitical tensions begin to escalate and trigger a proxy war in the Middle East. If Iran and Egypt were drawn into the conflict, it wouldn’t be long before several states in the emirates would start sending military forces to the region as well. In this case, another risk premium would be needed to be priced in, with prices set to return to $80.00 or higher.

At current levels, $71.46 remains in focus after a brief false break last week. If a supportive catalyst remains present, a rebound to $75.27 (high since January 12) could occur. On the way to this level, the 55-day simple moving average (SMA) at $73.36 could ease the upside a bit. Once above $75.27, the first resistance to come is $76.03, with the 100-day SMA in play.

On the downside, $67.11, a triple bottom in the summer of 2023, should support any declines and trigger a rally. Below that, the next level is $64.38, the March-May 2023 low.

US WTI Crude Oil: Daily Chart