Crude oil is consolidating with geopolitical tensions at the top of the agenda

• Crude oil traded more than 1% higher on Thursday as traders eyed the escalating conflict between Israel and Iran.
• Traders boosted oil prices after Iran sent ballistic missiles to Israel in retaliation for Lebanon’s ground incursion.
• The US dollar index is headed for a fourth straight day of gains.

Crude oil rose another 1% on Thursday as tensions in the Middle East remained high and despite a surprise build in US inventories. Traders are trying to gauge what the next step in the confrontation between Israel and Iran could be, either a further escalation or an easing of tensions. Meanwhile, the unexpected build in US crude inventories on Wednesday was completely ignored by the markets.

The US Dollar Index (DXY), which tracks the greenback’s performance against six other currencies, is set for a fourth straight day of gains and is testing the September high at 101.90. Another big batch of data will be released on Thursday, with a particular focus on Institute for Supply Management (ISM) numbers for the Services sector. Weekly jobless claims will also be closely watched in light of Friday’s non-farm payrolls number.

At the time of writing, crude oil (WTI) is trading at $70.86 and Brent at $74.71.

Oil and markets news: OPEC tries to save the day

• OPEC said via Twitter that a Wall Street Journal (WSJ) report published on October 2 – which stated that Saudi Arabia expected oil prices to fall to $50 a barrel if OPEC members failed to maintain their production cuts – was “inaccurate and misleading”.
• Russian data showed September crude output fell just short of the monthly target in the OPEC+ deal, according to people familiar with the country’s Energy Ministry figures. Russia would have produced 8.97 million barrels per day last month, Reuters reports.
• The US Energy Information Administration (EIA) reported a surprise increase of 3.889 million barrels on Wednesday, compared to an expected decrease of 1.25 million barrels.

Technical Oil Analysis: You can’t buy the dip

Crude oil prices touch a small discount to $71.46, a level that was also tested and rejected. on September 24 and 25. If the situation does not intensify further in the Middle East, a quick recovery could occur on the back of this risk premium trade, with a possible slide back to $67.11.

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 $72.80 could ease the upside a bit. Once it breaks above $75.27, the first resistance to come is $75.80, which aligns with the 100-day SMA.

On the downside, $67.11, a triple bottom in the summer of 2023, could still remain as support. If not, the next level below is $64.38, the lowest level since March and May 2023. Even $61.65 could come into play if a ceasefire emerges or if Israel signals that it will ended with his special operation in Lebanon.

US WTI Crude Oil: Daily Chart