Oil Prices Rise Amid Economic Optimism and Geopolitical Tensions

Oil prices have risen as the U.S. shows economic resilience, and China plans stimulus measures. Geopolitical tensions with Iran-backed Houthis add to market volatility, while Goldman Sachs adjusts Brent crude forecasts due to trade concerns.

Oil prices witnessed a rise for the second consecutive session due to positive economic indicators from major crude consumers: the United States and China. West Texas Intermediate (WTI) climbed 0.6%, settling below $68 per barrel following US retail sales data that indicated a modest slowdown, contrary to expectations of a significant decline. Additionally, China plans measures to stabilize its stock and real estate markets, enhance wages, and promote birth rates, according to state-run news outlet Xinhua.

Geopolitical tensions have intensified, with U.S. President Donald Trump stating that maritime attacks by the Houthi militia would be regarded as direct offenses from Tehran. This statement followed Defense Secretary Pete Hegseth’s remarks that U.S. strikes on Houthi positions will continue relentlessly until the group ceases its vessel targeting in the Red Sea. Dennis Kissler, a senior vice president for trading at BOK Financial Securities, noted that these geopolitical risks could compel some major market shorts to retreat.

One fund has placed options amounting to 20 million barrels that would yield profits if Middle Eastern tensions escalate Brent crude prices, which are currently near $71, towards $100. Despite this, crude prices have decreased by more than $10 per barrel since January’s peak, largely due to the escalating trade war initiated by Trump, OPEC+’s decision to increase supply, and prospects of an end to the conflict in Ukraine that could reinstate Russian oil barrels in the market.

Although futures are showing a bullish backwardation structure—with shorter-term contracts priced higher than longer-term ones—indicating robust supply-demand dynamics, concerns regarding economic conditions persist. Following the U.S.’s trade confrontations, Goldman Sachs Group Inc. has revised its Brent crude price forecasts downward, indicating lower oil demand growth as tariffs may hinder global economic expansion. Nevertheless, Goldman analysts predict a potential modest recovery in oil prices in the near term, given the resilience of the U.S. economy and ongoing sanctions against Russia.

In summary, the rise in oil prices is influenced by optimistic economic signals from both the U.S. and China, while geopolitical tensions involving Iran-backed Houthis further complicate the market dynamics. Despite certain downward pressures from trade issues and global growth concerns, traders anticipate a modest recovery in oil prices driven by solid demand and ongoing resilience in the U.S. economy.

Original Source: www.rigzone.com