Crude oil prices climbed to the highest levels in more than three years Wednesday amid the ongoing tension in the Middle East. Brent touched levels above $73 and retreated to $72 today. The market remains bullish as there are lingering concerns over supply disruptions due to the Syrian factor as well as the conflict between Saudi Arabia and Iran.
The already healthy rally was fuelled further yesterday by Donald Trump who warned Russia to prepare for a strike on its ally, Syria. So far, the president hasn’t taken decision on the matter, which caused some relief in the global markets and therefore has somehow eased the upside pressure on crude prices.
Brent has ignored the negative US oil inventories data which showed larger than expected build, by 3,3M barrels, while production topped 10,5 mln for the first time. So, as the geopolitical concerns start to abate, crude oil could turn bearish, as there are no significant fundamentals behind the current rally which looks to aggressive from the technical point of view. To avoid such a scenario in the short-term, Brent needs to keep above the $72 mark. Daily close below may open the way to further correction.
By Helen Rush
Senior Analyst at Capital Markets