Oil prices rose for a second straight session due to optimistic signals from the US and China economy, while geopolitical tensions from US actions against Iran-backed Houthis contribute to market volatility. Goldman Sachs lowered its Brent crude forecasts, yet anticipates a modest short-term recovery due to resilience in the US economy and ongoing sanctions against Russia.
Oil prices experienced an increase for the second consecutive session, driven by positive economic indications from the world’s two largest crude consumers, China and the United States. Specifically, West Texas Intermediate rose by 0.6%, settling below $68 per barrel. This uptick occurred following US retail sales data, which demonstrated a smaller-than-expected slowdown.
In response to stalling economic activity, China is contemplating various measures aimed at stabilizing its stock and real estate markets, in addition to initiatives to enhance wages and increase the nation’s birth rate, according to the state-operated news outlet Xinhua.
Geopolitical tensions in the Middle East have also influenced oil market dynamics. US President Trump stated that maritime attacks carried out by the Iran-backed Houthi militia will be considered direct offenses by Tehran. This followed Defense Secretary Pete Hegseth’s assertion that US airstrikes will intensify until the Houthis cease their attacks on vessels in the Red Sea.
Senior Vice President for Trading at BOK Financial Securities, Dennis Kissler, noted that such geopolitical concerns might prompt major market shorts to retreat. He mentioned that the US crude contract is currently facing resistance at a moving average of $68.56. Additionally, an options trade equivalent to 20 million barrels indicates market expectations of a potential price surge toward $100 for Brent’s June contract, which is presently near $71.
Despite the recent rise, crude oil prices have dropped over $10 a barrel since reaching their highest point in January, influenced by Trump’s trade conflicts, the OPEC+ supply increase, and the potential conclusion of the Ukraine war that could bring Russian oil back to market.
Furthermore, futures markets are exhibiting a bullish backwardation structure, with short-term contracts priced higher than long-term ones, reflecting a stable supply-demand equilibrium. However, Goldman Sachs recently revised its Brent crude price forecasts downward amid a concerning economic outlook linked to heightened tariffs threatening global growth. Nevertheless, Goldman anticipates a modest recovery in oil prices in the near term, supported by a resilient US economy and ongoing sanctions against Russia.
In conclusion, the recent rise in oil prices is attributed to positive economic signals from the US and China, alongside escalating geopolitical tensions in the Middle East. As markets react to these dynamics, it remains crucial for stakeholders to monitor potential fluctuations driven by both economic indicators and geopolitical developments. Current forecasts indicate a cautious optimism for modest recovery in oil prices, even as analysts adjust their long-term expectations.
Original Source: www.rigzone.com
