Oil prices rose on Wednesday amidst dwindling hopes of a ceasefire deal between Israel and Hamas. Brent crude futures traded at an intraday high of $89.89 per barrel, after gaining 0.59% while West Texas Intermediate was up by 0.61% and trading at $85.75 at 11.45 UTC. Brent briefly touched the $90.00 per barrel mark before easing downwards, but the geopolitical sentiment could propel a retest later in the day.
The commodity registered a decline of more than 1% on Tuesday after the American Petroleum Institute (API) published data showing a higher-than-expected spike in US inventories. The reading came in at 3.034 million barrels, a significant build-up from the previous week’s decline of 2.286 million barrels, and above the forecast 2.415 million barrels. This came in amid a renewed effort by Qatar to broker a ceasefire agreement between Israel and Hamas.
However, Hamas rejected Israel’s proposals, with the militant group’s leaders stating that no progress had been made, despite the optimistic tone by the arbitrators prior to the talks. Furthermore, Israel Prime Minister Benjamin Netanyahu stated on Tuesday that a date had been set for Rafah ground offensive, further dampening hopes of a peace deal. Elsewhere, Iran, which has in recent days threatened to attack Israel, threatened that it would move to close the Strait of Hormuz if it felt that Israel’s presence in the UAE threatened its interests. That could complicate matters further on the supply-side as about a fifth of the world’s crude shipments pass through the strait daily.
Despite the buildup in US inventories (which could be confirmed by the official EIA figures), the upside looks stronger. Mexico’s state oil company, Pemex, announced earlier in the week that it will cut exports by 300k barrels per day in May. This will put a further strain on supplies, hence likely propping up prices.
Technical analysis
The momentum on the WTI crude oil price favours further advances. The buyers will be in control if they keep the price above the 85.34 pivot mark. That could enable them to break the resistance at 86.03, and possibly test 86.75 in extension. However, a move below 85.34 will signal control by the sellers, with support established at 84.75. A continuation of control by sellers at that level could build the momentum to breach the support and potentially test 84.10.
