🛢️Brent Crude Oil Tests $95 per Barrel

Oil prices are continuing their dynamic rally, with Brent crude quotations surpassing the $95 per barrel level for the first time in 6 weeks, just before the rolling over of futures contracts. Such strong price movement is primarily the result of growing concerns about the security of global crude oil supplies, which have emerged alongside the escalation of geopolitical tensions in the Middle East. The market is increasingly factoring in the risk that a further development of the conflict could restrict oil supply and disrupt its transport to global consumers.

Monthly Changes in Crude Oil Prices

After two months of sharp declines, crude oil is returning to extremely high growth, which already exceeds 30%. Looking at the perspective of the last 25 years, increases above 30% have only occurred a few times. Source: Bloomberg Finance LP, XTB

The reason for the increases is the postponement of potential peace talks between the USA and Iran. Iran has clearly confirmed that no peace talks are currently underway, even though Iran was supposed to talk with Pakistani mediators yesterday. Moreover, Trump himself indicated an intensification of bomb attacks if Houthi rebels decide to attack ships in the Bab al-Mandab Strait, which is currently not only a key trade route between Europe and Asia but also the main export route for Saudi oil to Asia. Any disruption to ship traffic in this area means higher transport costs and greater uncertainty for energy companies.

The mere risk of restricting shipping in this strategic location is enough for investors to start adding an extra risk premium to the price of the commodity. As a result, some carriers decide to change routes, which extends deliveries and increases the costs of the entire transport chain. On the other hand, transporting Saudi oil entirely around, without using the strait, would completely defeat the purpose.

In the current situation, geopolitical factors have a significantly greater impact on prices than short-term supply and demand data. Although information from the United States indicates inventory stabilization and production in some oil-producing countries has clearly increased, the market remains focused primarily on the potential risk of supply restrictions from the Middle East. Investors fear that even minor disruptions in one of the most important oil-producing regions could quickly lead to further price increases.

Brent Crude Technical Analysis on the D1 Interval

Brent crude continues its strong rally and today is not only testing $95 per barrel but is first breaking through the 50.0 retracement of the last downward impulse and the 100-period moving average. The next important resistance zone is around $98-100 per barrel. It is worth noting, however, that we have the rolling over of futures contracts ahead of us, which should bring oil prices down to around $90 per barrel. If peace prospects do not emerge, investors will likely put upward pressure on the oil market again after the rollover. Source: xStation5