Oil prices have risen due to strong economic signals from the US and China, despite ongoing geopolitical risks posed by Iran-backed Houthis. West Texas Intermediate reached just below $68 per barrel while Goldman Sachs revised down its Brent crude forecasts, anticipating reduced oil demand growth due to Trump’s trade policies. However, a modest recovery in prices is possible given the current market dynamics.
Oil prices increased for the second consecutive session, driven by positive economic signals from the world’s largest crude consumers. West Texas Intermediate rose by 0.6%, settling below $68 per barrel. This uptick occurred after US retail sales indicated a modest slowdown, contrary to expectations of a severe decline. Furthermore, China announced plans to stabilize its stock and real estate markets while boosting wages and birth rates, according to the state news agency Xinhua.
Geopolitical risks have been heightened as US President Donald Trump indicated that maritime attacks by the Iran-backed Houthi militia would be viewed as direct assaults on Tehran. This follows Defense Secretary Pete Hegseth’s assertion that US strikes on Houthi targets would be relentless unless their attacks on vessels in the Red Sea cease. Analysts suggest that such tensions could lead traders to reevaluate their positions in the market.
Dennis Kissler, a senior vice president for trading at BOK Financial Securities, noted that US crude’s front-month contract faces resistance around a short-term moving average of $68.56. There have been substantial options bets placed, with at least one fund banking on a potential increase in Brent’s prices toward $100 due to Middle Eastern turmoil.
Despite rising oil prices, crude has fallen over $10 since January’s peak, influenced by Trump’s trade issues, OPEC+’s decisions to ramp up supply, and potential peace talks in Ukraine, which could reintroduce Russian oil into the market. Additionally, market futures display a bullish backwardation structure, indicating a healthy supply-demand dynamic.
The waning economic forecast, stemming from Trump’s policies against major trading partners, prompted Goldman Sachs to revise its Brent crude projections downward. Analysts, including Daan Struyven, predict oil demand growth may fall short of previous forecasts due to tariff implications on global growth. However, Goldman expects prices might recover moderately in the near term, given the resilience of the U.S. economy and ongoing sanctions on Russia.
In summary, oil prices have been positively influenced by optimistic economic signals from both the United States and China. However, geopolitical tensions regarding Iran and the Houthis may cause market volatility. A recent downward revision by Goldman Sachs regarding oil demand growth reflects concerns over the economic climate. Yet, analysts propose that prices may see a modest recovery in the short term due to the resilience of the U.S. economy and continued sanctions on Russia.
Original Source: www.rigzone.com
