. Middle East Conflict vs. Demand Worries: Oil Market Equilibrium

Middle East Conflict vs. Demand Worries: Oil Market Equilibrium

Middle East Conflict vs. Demand Worries: Oil Market Equilibrium

25 Oct 2023

Oil stabilizes as concerns about conflict in the Middle East counterbalance apprehensions regarding demand.

FUNDAMENTAL OVERVIEW

Brent, the oil benchmark, remained above $88 on Wednesday. Concerns about an escalation of conflict in the Middle East offset worries about reduced demand due to economic challenges in Europe.

Brent crude futures increased by 11 cents, reaching $88.18 per barrel at 0948 GMT. In contrast, U.S. West Texas Intermediate crude futures dipped by 5 cents to $83.69 per barrel.

Several nations are advocating for a temporary halt or ceasefire in the conflict between Israel and Hamas in the Gaza Strip to facilitate the delivery of humanitarian aid to Palestinian civilians under siege. In parallel, on Tuesday, U.S. and Saudi Arabian leaders discussed strategies to prevent the conflict from expanding to potentially involve major oil producer Iran.

On a positive note, there is potential for crude oil prices to receive a boost. China, the largest global oil importer, has seen its top legislative body approve a bill authorizing the issuance of 1 trillion yuan (equivalent to $137 billion) in sovereign bonds. Additionally, local governments will be permitted to issue new debt from their 2024 quota to stimulate economic growth.

However, it’s important to consider that demand for crude oil in China might face limitations. Beijing has set a cap on its oil refining capacity at 1 billion metric tons by 2025, aiming to streamline its extensive oil processing sector and mitigate carbon emissions.

BRENT CRUDE OIL TECHNICAL ANALYSIS DAILY CHART:

Technical Overview

Brent Crude Oil is currently trading within a down channel.

Brent Crude Oil is positioned below all Moving Averages (SMA).

The Relative Strength Index (RSI) is in the neutral zone, while the Stochastic oscillator suggests a negative trend.

Immediate Resistance level: 87.72

Immediate support level: 86.41

HOW TO TRADE BRENT CRUDE OIL

Brent Crude Oil initially experienced a significant price increase but encountered resistance in the specified zone, causing it to decline. Although there was a temporary interest in an upward movement, it proved unsustainable, leading to another decline. Presently, the price hovers close to a crucial support area, and if this level is breached, it could lead to further downward movement.

TRADE SUGGESTION- STOP SELL– 85.53, TAKE PROFIT AT- 83.22, SL AT- 87.07.