Oil Surges On Middle East Strikes, Then Retreats As Market Focuses On Supply Fundamentals

(MENAFN- The Rio Times) Brent and WTI crude oil markets saw dramatic swings over the past 24 hours, with prices first surging to five-month highs before quickly retracing.

The catalyst for this volatility came from official reports that the United States joined Israel in attacking Iran's key nuclear facilities over the weekend. As of 11:22 GMT, Brent crude futures traded at $78.89 per barrel, up 2.44%, while WTI rose to $75.71, up 2.53%.

Both benchmarks had earlier spiked by more than 3%, with Brent briefly topping $81 and WTI reaching $78.40, before profit-taking set in. This price action followed President Trump's public statement confirming the strikes.

The announcement heightened fears of a broader conflict in the Middle East. Iran, OPEC 's third-largest producer, responded by passing a parliamentary resolution authorizing the closure of the Strait of Hormuz, a chokepoint for about 20% of global oil supply.

However, no immediate action followed, and actual supply flows remained uninterrupted. Market analysts noted that while the geopolitical risk premium is real, it may not hold without physical supply disruptions.



June Goh, a senior analyst at Sparta Commodities, said the risks to oil infrastructure have risen, but shipping companies have not yet avoided the region en masse.

Brent's 13% rally since June 13, compared to WTI's 10% gain, reflects the market's focus on seaborne supply risks. However, the absence of actual supply loss and a build in U.S. crude inventories, as reported by the American Petroleum Institute, tempered the rally.

The API reported U.S. crude stocks rose by 2.5 million barrels last week, following a 4.3 million-barrel increase the week before, defying expectations of a draw.
Brent and WTI Technical Analysis
Technical analysis of the Brent 4-hour and daily charts reveals the story behind the volatility. On the 4-hour chart, Brent spiked above $80 but rapidly reversed, leaving a long upper wick.

The Relative Strength Index (RSI) surged above 70, signaling overbought conditions, while the Moving Average Convergence Divergence (MACD) showed bullish momentum but has since flattened.

Price remains above the 50, 100, and 200-period moving averages, but the reversal suggests profit-taking and uncertainty. The daily chart shows a strong uptrend since early June, with the RSI still elevated and a large“shooting star” candle, a classic reversal pattern after a sharp rally.

WTI's technicals tell a similar but less extreme story. The daily chart shows a sustained uptrend, but the RSI has not reached the same overbought levels as Brent.

The MACD remains positive, but momentum is slowing. WTI did not match Brent's highs, reflecting its lower exposure to Middle East shipping risks.

Macroeconomic factors continue to weigh on the broader outlook. Official forecasts from the U.S. Energy Information Administration and major banks expect global oil production to outpace demand in 2025 and 2026.

This is expected to lead to rising inventories and downward pressure on prices. OPEC+ has accelerated output hikes, and global demand growth remains sluggish amid recession fears and ongoing trade tensions.

In summary, the oil market's sharp rally and subsequent pullback over the last day reflect a classic geopolitical risk premium, quickly tempered by fundamental realities. Unless actual supply disruptions occur, analysts expect volatility to persist but see limited upside from current levels.

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