Crude Oil price rose more than two percent on Tuesday as Israel threatened to attack the Lebanese state if its truce with Hezbollah collapses, and as investors positioned for OPEC+ to announce an extension of supply cuts this week..
Brent crude futures posted their biggest gains in two weeks, rising by 2.5%, to settle at $73.62 a barrel. U.S. West Texas Intermediate crude futures also rose the most since Nov. 18, gaining 2.7%, to close at $69.94 per barrel.
Israeli forces have continued strikes against what they say are Hezbollah fighters ignoring last week’s truce agreement in Lebanon. Top Lebanese officials have urged Washington and Paris to press Israel to uphold the ceasefire.
Also supporting oil prices, the Organization of the Petroleum Exporting Countries and allies will likely extend output cuts when OPEC+ meets on Thursday.
OPEC+ is likely to extend its latest round of output cuts until the end of the first quarter at its Dec. 5 meeting, according to sources. OPEC+, which accounts for about half of the world’s oil production, has been looking to gradually unwind production cuts through 2025.
However, the prospect of an oil market surplus has exerted downward pressure on prices, with Brent trading nearly 6% below its average for December 2023.
The global oil demand outlook remains weak, with China’s crude imports likely to peak as early as next year, as demand for transport fuel begins to decrease, researchers and analysts said.
Saudi Arabia, the world’s top exporter, is expected to cut crude prices for Asian buyers to the lowest levels in at least four years, according to traders.
Concerns that the U.S. Federal Reserve may not cut rates at its December meeting have also capped oil prices.
In the Middle East, holes continued to appear in a U.S.-brokered ceasefire between Israel and militant group Hezbollah, with nine people killed in strikes on two southern Lebanese towns shortly after Hezbollah fired missiles on an Israeli military position in the disputed Shebaa Farms area on Monday.
Technical Outlook – Crude oil Price
Crude oil prices demonstrated resilience, gaining over 2% to settled at 5,929, compared to the previous close of 5,779. Prices have been attempting to sustain above the key support level of 5,745 since November 26, while forming a cluster of indecisive candlestick patterns.
Prices are currently trading below the 50-day moving average (DMA) but are positioning to test this level in the near future.
The RSI (14) and its 9-period SMA are signaling a bullish crossover, suggesting the potential for upward momentum.
Recommendation:
- Bullish View: As long as prices hold above the key support of 5,745, a recovery towards the immediate resistance levels of 5,980, and 6,045 is anticipated.
- Bearish Scenario: A break below 5,745 could shift sentiment to bearish, with potential downside targets at 5,678 and 5,632.
Traders are advised to monitor the 5,745 level closely for directional cues any dip till 5845-5820 could attract some buying again, unless it gives a closing below it and manage risk accordingly, as all eyes are on crude oil as it faces its moment of truth ahead of the OPEC+ decision.
Until then, Happy Trading!
Commodity Samachar Securities
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