Weekly Outlook: Oil Prices May Reverse Amid Ongoing Geopolitical Risks

Global crude oil prices recorded gains for four consecutive weeks, supported by rising geopolitical tensions that overshadowed concerns over excess global supply. However, analysts suggest that the recent price movement does not reflect any fundamental shift in global supply and demand conditions.

XS.com analyst Antonio Di Giacomo noted that the price increase was largely driven by hedging activity and risk management by market participants. Although the probability of direct U.S. military action against Iran has eased, the geopolitical risk premium remains due to the potential for conflict escalation in the Middle East.

In the absence of significant supply disruptions or a strong recovery in global demand, oil prices are expected to remain range-bound. Market volatility is likely to be driven more by news sentiment rather than the formation of a clear long-term trend.

At the end of last week’s trading session, WTI crude rose 0.4 percent to USD59.44 per barrel, posting a weekly gain of 0.5 percent. Brent crude climbed 0.6 percent to USD64.13 per barrel, up 1.2 percent week-on-week.

FXEmpire analyst Christopher Lewis warned that oil prices remain vulnerable to reversals amid geopolitical uncertainty. He added that easing tensions, reflected in recent statements by the U.S. President, have caused the geopolitical risk premium to fade quickly, putting pressure on prices.

From a technical perspective, market signals indicate growing skepticism over military escalation, although volatility remains elevated. The USD55 level is seen as a strong support for WTI, while further upside may emerge if prices break above the 50-week EMA. For Brent, USD65 remains a key resistance level, with support around USD58.50.

Overall, global oil supply continues to exceed demand. Prices are considered to have largely priced in geopolitical risks and fundamental conditions, suggesting a consolidative market with downside pressure during rallies.

Source: IDX Channel