Crude Rally Continues As Middle East Tensions Escalate

Oil prices rose another 2% on Tuesday in the wake of Israel’s bombing of Iran’s Damascus embassy, which Iran has said it will “make them regret”. Markets have not been too concerned by the problems in the Middle East while they don’t impact crude but if Iran becomes directly involved then risks to oil supply rise substantially. The USD index fell 0.1%.

• WTI rose 2.1% to $85.44, close to the intraday high of $85.50. It has started today slightly lower at $85.41. The bull cycle remains intact and the strong start to April has reinforced bullish conditions. Key resistance is at $84.87 and initial support at $80.60.
• Brent is approaching the $90 level after rising 2.1% on Tuesday to $89.27, close to the high of $89.32. Technicals remain bullish with key resistance at $88.51 and initial support at $84.63.
• Bloomberg reported that there was an inventory drawdown of 2.29mn barrels of crude in the US last week, according to people familiar with the API data. Gasoline stocks fell 1.46mn barrels and distillate -2.55mn. Later today the official EIA data is released.
• Today OPEC+ will meet online but no change is expected as members said current quotas were appropriate. A decision on whether to extend the cuts into Q3 is likely to be made in early June.
• Ukrainian drones targeted an oil refinery in Tatarstan, 1000km into Russia from its border and the furthest attack so far. Apparently, there was only minimal damage but continued strikes on Russian energy infrastructure have supported oil prices recently.