Oil settles around $96 after rallying amid Middle East tensions

WTI crude recovered above $86 earlier on Friday after fluctuating around that mark all week. Even though the EIA predicts a poor forecast for oil demand, oil prices have increased by almost 1%. The US Dollar Index rose 0.72% to 106.015, marking a new five-month high. WTI finished at $94.975 per barrel at the time of writing.

After a slight decrease of 0.75% on Thursday, oil prices surged higher once more on Friday. The decision is made in spite of the US Dollar strengthening for the fourth day in a row this week and as commodities are once again surging due to geopolitical tensions.

The International Energy Agency (IEA) has lowered its oil demand prediction for the current and upcoming years, predicting slower growth in 2025 as a result of a positive economic outlook and the growing market share of electric vehicles in the world’s automobile industry.

While this is going on, the US dollar is rallying an incredible 1.8% because markets are beginning to anticipate a wider interest rate difference between the Fed and other major central banks.

This difference in interest rate policy stances is isolating the nations (and consequently the local currency) where there is an urgent need for central banks to make cuts from the nations where they are not now required. Strong US economic data places the US at the top of the list of nations where rate cuts are completely unnecessary given the current circumstances.

Earlier, WTI was trading at $86.82 and Brent Crude at $91.34. At the time of writing, Brent is trading at $89.64, having settled around $90 as well.

The Israeli government has advised citizens to prepare for possible direct Iranian assaults in the days ahead. The OPEC and IEA forecasts for oil demand differ significantly. The IEA predicts lower consumption in 2024 and 2025, but OPEC said on Thursday that it will be closely monitoring summer demand because it cannot withstand an unanticipated spike in demand.


In addition, the IEA study released on Friday states that non-OPEC projects will add more than 3 million barrels per day, with Brazil being the largest contributor. OPEC’s daily production climbed by 110,000 barrels in comparison to February’s figures. Kuwait and Saudi Arabia were responsible for the little increase.

An increasing number of municipal governments in Israel, the US, and Europe are issuing warnings about potential Iranian reprisal. In theory, oil prices are still high because Middle East tensions are getting closer to a new level. Tensions are rising because Iran has threatened to strike against Israel or any US asset in the region. Such an attack carries the possibility of disrupting oil deliveries and plunging the entire region back into a protracted conflict. However, the pessimistic IEA assessment predicted that Brazil will soon contribute much more non-OPEC oil to the market. Brazil’s inauguration is still required even though the country was supposed to join OPEC at the beginning of this year.

If the previous week’s high of $87.12 is broken, the $90 handle should be within reach. The October 20 peak of $89.64 is one minor obstacle in the way. Expect even $94 to become a possibility in the event that Middle East tensions continue to rise, and a new 18-month high may be in store.

On the down side, following a very clean break and test for support on April 1 and 2, $83.34 is the first level to look for. If it fails to hold, $80.63 is the next most likely choice for a crucial level of support. The 55-day and 200-day Simple Moving Averages (SMAs) convergence at $79.32, which is a little softer, could stop any additional decline.