Oil prices rose for a second session on encouraging economic signals from China’s stimuli plans and US retail sales. Geopolitical tensions related to the US confrontations with Iranian-backed Houthis add market volatility, although the long-term outlook is cautious due to trade wars and OPEC+ supply increases.
Oil prices have increased for the second consecutive session, buoyed by positive economic signals from top crude consumers, China and the US. West Texas Intermediate rose by 0.6%, settling just below $68 per barrel, as US retail sales revealed only a slight slowdown, contrary to fears of a significant downturn. Additionally, China is set to implement measures aimed at stabilizing its stock and real estate markets and enhancing the nation’s workforce participation.
Geopolitical tensions are heightening, with US President Donald Trump equating maritime assaults by Yemen’s Iran-backed Houthis to direct Iranian confrontations. This statement followed Defense Secretary Pete Hegseth’s announcement of relentless US strikes on Houthi positions until they cease attacks on maritime vessels. These developments increase market volatility, as noted by Dennis Kissler of BOK Financial Securities, stating that these tensions could lead short-sellers to reevaluate their positions.
At least one fund is betting on a potential surge in oil prices, placing an options wager that would profit if Brent crude approaches $100, amidst increasing Middle Eastern conflicts. However, crude has dropped over $10 from its January high due to Trump’s trade war, an OPEC+ supply increase, and potential resolution of the Ukraine conflict that may reintegrate Russian oil into the market.
Futures maintain a backwardation structure, indicating a healthy supply-demand balance, with shorter-term contracts priced higher than their longer-term counterparts. Nevertheless, Goldman Sachs has lowered its Brent crude price forecasts, anticipating reduced oil demand growth due to the damaging effects of tariffs on global economic progression. Despite this, the investment firm suggests prices may experience a slight short-term rebound, as the US economy appears robust and sanctions on Russia remain firm.
In summary, oil prices have increased due to optimistic economic developments in the US and China, while geopolitical tensions in the Middle East continue to raise concern among investors. Although crude prices have seen a decline from earlier highs, the market still exhibits signs of strength with backwardation in futures trading. The economic outlook remains uncertain, prompting firms like Goldman Sachs to adjust their forecasts while leaving room for potential short-term price recoveries.
Original Source: www.rigzone.com
