Crude oil futures climb back into positive territory

HOUSTON: US crude futures returned to positive territory on Monday after falling on easing fears of a wider conflict in the Middle East.

US West Texas Intermediate crude was up 1 cent, or 0.01 percent, at $83.15 a barrel at 1651 GMT. The front-month WTI crude contract for May expires on Monday.Brent crude futures were down 33 cents, or 0.38 percent, at $86.96 a barrel.

Both benchmarks had been down more than $1 a barrel earlier on Monday.The recovery following on the heels of fading geopolitical risk was replaced by a re-evaluation of market fundamentals, said Phil Flynn of Price Futures Group.

"The fundamentals on oil are strong," Flynn said. "The expectation is the markets are going to tighten this summer on the supply side."

Geopolitical risk premiums tend not to last if supply is not actually disrupted, said UBS strategist Giovanni Staunovo, adding that the high spare capacity of a few oil-producing countries could compensate for any supply disruptions.

The market reaction to the rising geopolitical temperature was another example that it is only reasonable to expect a protracted oil rally if the Strait of Hormuz- the world's most important oil artery - was disrupted or Saudi Arabia directly drawn into the conflict, noted Tamas Varga of oil broker PVM.

Meanwhile, plentiful supplies of some of the biggest crude grades are limiting the impact on oil futures of conflict in the Middle East, a Reuters analysis found.On the economic front, inflation is back in focus, with comments from Federal Reserve officials and a run of hotter-than-expected inflation data forcing a paring back last week of expectations of interest rate cuts.

Economic concerns have again become a bearish factor in the crude market, with prices under pressure due to a large build in the U.S. stockpile and a hawkish Fed that has led to a strong dollar, said Tina Teng, an independent market analyst.

Amid tensions in the Middle East, potentially disrupting oil supplies, the oil complex is an interesting market to keep an eyeball on at the moment. Escalation between Iran and Israel has been limited following attacks from both sides earlier this month. What is reasonably clear is that both nations are trying to prevent an all-out war, for now at least.

Given Iran’s contribution to oil production (it provides approximately 3.3 percent of the world’s oil supply), further escalation may fuel a rise in oil prices (as well as gold prices and the US dollar on safe-haven appeal). A considerable bid in oil could also have wider-reaching implications, fuelling inflationary pressures and perhaps leading to rates remaining higher for longer.

Price action on the daily timeframe concluded the week confined by support from $81.69 and resistance from $85.20.Nestled close by current support are the 200-day and 50-day simple moving averages at $79.82 and $80.87. Aside from the moving averages, limited support exists beneath current support until $77.55, a level joined closely by an ascending channel support line, extended from the low of $67.74. If we step below here, monthly support awaits at $75.39, a level complemented by a moderate Fibonacci cluster.

Aiding current resistance is also channel resistance, taken from the high of $76.14, while north of here shines the technical light on another layer of resistance at $88.32.The combination of the 200-day and 50-day simple moving averages at $79.82 and $80.87 and support from $81.69 could be a location dip buyers make a show from this week. This is bolstered by the current uptrend, which has been in play since late 2024, and the recent channel resistance breach demonstrating bullish strength. Similarly, another technically interesting area of support resides at $77.55, combined with channel support.