Oil prices rallied strongly on Tuesday; a low price could affect inflation.
USOIL – 4H Chart
Oil has found a strong support cluster, and Monday’s move was again strong, higher than $83. The price of oil could push toward $85 next.
Oil prices rose again on Tuesday as investors continued to worry about the risk from geopolitical concerns in the Middle East. Brent crude oil futures traded higher at $87.18 a barrel. US crude oil prices rose above $83.
Both benchmark oil prices had fallen on Monday after no further escalation of the Middle East tensions over the weekend.
“The unwinding of geopolitical risk premium has dented crude oil prices recently as supply was not disrupted meaningfully,” said Sugandha Sachdeva at SS WealthStreet.
Even if there was no escalation over the weekend, there is still a risk of further conflict at any time, supporting the oil price.
ANZ analysts said in a podcast that US approval of new sanctions on Iran’s oil sector could include foreign ports, vessels, and refineries that knowingly process or ship Iranian crude.
“The geopolitical backdrop is still very fraught with so many risks at the moment, so we’re going to see a lot of volatility until there’s a lot more clarity around it,” the ANZ analysts said.
Wall Street is now awaiting US GDP on Thursday and personal consumption data on Friday, which is the preferred indicator of inflation for the Federal Reserve.
Fed officials and other central banks may be holding off while there is a threat of further tensions abroad. The Ukraine conflict first sparked inflation, and any sanctions on Iran could lead to higher oil prices.
Oil was hurt last week by a rise in inventories of 4.09 million barrels as shale companies continue to produce large amounts. The number was higher than the increase of 3.03 million barrels reported by the API for the previous week, while economists were expecting an increase of only 600,000 barrels.
If inventory numbers settle this week, it could support oil prices further, alongside the risk of further geopolitical tensions.
