Oil Prices Rise Further On Middle East Escalation Concerns

Oil prices were stronger driven by deteriorating tensions in the Middle East and lack of progress towards a solution. There has been an escalation in fighting between Israel and Hezbollah in Lebanon which has increased market jitters but strong supply and spare capacity kept a lid on prices. The USD was flat.

• WTI broke above $79 towards the end of Friday’s session to be up 1.5% at $79.22/bbl. Prices are 4.4% higher in February to date. Recent gains this month still seem to be corrective. The intraday high of $79.35 broke key short-term resistance at $79.29 briefly. This has opened up $82.34. Initial support is at $75.07/bbl, 50-day EMA.
• Brent rose above $83 late in the European session and held above this level. It finished 0.9% higher at $83.58/bbl, close to the intraday high of $83.66, which cleared initial resistance at $83.60. The benchmark is up 3.8% this month. For now the recovery appears corrective. Key short-term resistance is at $84.17. The bear trigger is at $72.96.
• Geopolitics are driving oil prices currently as fundamentals are weak with plentiful non-OPEC supply, lax OPEC quota compliance and IEA expectations that demand will ease through 2024 and the market being in surplus throughout the year. January US CPI data also points to the Fed being on hold for longer. Bloomberg reported that Russia has almost cut production to the levels it promised last year for the first time.