Israel declared a "war situation" after the deadly attacks of Palestinian militant organization Hamas , in a development that likely sets back efforts to normalize relations between Israel and key Arab states, such as Saudi Arabia – one of the world's top oil producers. The potential involvement of Iran (another energy provider) in the attacks, is also important for the oil market.
The International Energy Agency (IEA) in its latest monthly report sees Iran as one of the top sources of oil supply growth for the year. It also noted that the country's output rose by around 600,000 barrels/day in the first eight months, despite sanctions . Washington appears to have been overlooking the increase in Iran's oil shipments, since they help lower prices, but the new developments could lead the US to a more forceful stance and make any lifting of restrictions much harder.
The Middle East is an important energy hub and the military conflict erupted at a time when oil market is tight and inventories low, as a result of the massive supply cuts by Saudi Arabia, Russia and other OPEC+ members. On the other hand, concerns around demand have emerged as China's recovery has slowed and major central banks around the world largely point to sustained restrictive monetary setting.
USOil jumped after the Hamas attacks on Monday, facilitating a rebound from last week's steep losses. It tries to regain the initiative and return above the EMA200 (balck line) that would bring the 2023 highs back in the spotlight (95.05-96.52), but we are not yet convinced about the $100 narrative.
Despite the initial boost, USOil eases as it's still early to assess the full impact of the Middle East flare up. It remains below the EMA200 and this creates risk for lower lows towards 77.57. However, sustained weakness does not look easy under current conditions.
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
Retrieved 11 Oct 2023 https://www.gov.il/en/departments/news/spoke-war081023
Retrieved 01 Mar 2024 https://www.iea.org/reports/oil-market-report-september-2023