Oil futures experienced a boost on Thursday, as they tried to recover from a three-day losing streak. The U.S. benchmark managed to maintain itself slightly above the $80-a-barrel level, after erasing gains resulting from the recent Hamas attack on southern Israel.
Price Action
- West Texas Intermediate crude for December delivery rose by $1.15, or 1.4%, reaching $81.59 per barrel on the New York Mercantile Exchange. This follows a session in which it hit its lowest point since August 28.
- January Brent crude, the global benchmark, achieved a gain of $1.08, or 1.3%, trading at $85.71 per barrel on ICE Futures Europe. This marks its highest level since October 6, the last trading day prior to the Hamas attack.
Market Drivers
Market experts suggest that the overall positive sentiment in global markets, coupled with rising U.S. equity futures and a weaker U.S. dollar, contributed to the rise in oil prices. Furthermore, the recent stance of the Federal Reserve, which conveyed a lack of enthusiasm for an imminent rate hike, also played a role in boosting crude.
Oil Prices Rise Amidst Weaker Dollar and Uncertain Geopolitics
Oil prices experience an upward trend with the influence of a dovish Fed and a weaker U.S. dollar, which is generally good news for Asia’s major buyers. However, Stephen Innes, managing partner at SPI Asset Management, expresses skepticism about the reliability of the weaker dollar channel as a bullish signal for oil prices.
Geopolitical Tensions Impact Oil Market
Observers closely monitor the Israel-Hamas war for potential repercussions involving Iran. Initially, crude prices rallied due to concerns that an escalation of the war could result in stricter U.S. sanctions on Iranian crude exports. Moreover, a worst-case scenario would involve threats to crucial transportation chokepoints and regional infrastructure by Iran or its proxies. However, prices have since retreated.
Market Sentiment Reflects Stability
David Morrison, senior market analyst at Trade Nation, notes that the current oil price levels indicate traders’ lack of expectation for the conflict to spread any further. Despite this perception of stability, analysts at Sevens Report Research emphasize that the threat to oil production, infrastructure, and logistics persists.
Short Sellers Remain Cautious
The potential for disruptions in the oil market will keep short sellers on high alert until a cease-fire is declared. This vulnerability may create opportunities for significant short squeezes, as highlighted by analysts at Sevens Report Research.
