Oil prices rise for the third day in a row, What are the driving factors
Oil markets on Wednesday witnessed a new upward wave, as prices rose for the third day in a row, Brent crude oil approached the level of 60 dollars per barrel, after settling above its 4-year lows.
This rise is supported by several factors, most notably optimism about the US-China trade talks, expectations of a decline in US production, as well as new geopolitical tensions in Asia.
- From oversupply to limited recovery
At the beginning of the week, oil witnessed a sharp decline, reaching its lowest levels in 4 years, after the decision of the OPEC alliance to accelerate the pace of increasing production, which raised fears of an oversupply of oil, especially given the impact of US tariffs on global demand.
- Optimism over trade talks
Positive news about the resumption of trade talks between Washington and Beijing contributed to the support of prices, as investors are betting on the possibility of easing trade tensions, which could boost oil demand. However, the actual progress in reducing tariffs remains a decisive factor for the continuation of this recovery.
- US crude oil inventories decline
Data from the American Petroleum Institute (API) released on Tuesday showed a significant decrease in crude oil inventories by 4.5 million barrels during the week ending May 2, reinforcing expectations of a slowdown in supply.
The US Energy Information Administration (EIA) is scheduled to release its official report on inventories on Wednesday at 5:30 pm Egypt time, where analysts expect a decrease of about 800 thousand barrels, which may give oil an additional boost if the data confirm these expectations.
- Geopolitical tensions
Oil received another support from the military escalation between India and Pakistan, as Pakistan announced the shooting down of five Indian aircraft, in a development that increases tension between the two nuclear powers, these events have led to fears of possible disruptions in the flow of oil, prompting investors to buy crude as a safe asset.
The impact of the Fed's decision
on oil The market is also waiting for the decision of the US Federal Reserve today, where it is expected to keep interest rates unchanged. Although the decision itself may not directly affect oil, any signs of slowing economic growth due to the trade war may put pressure on the demand outlook, which may limit crude's gains.
At the technical level
We expect oil to rise after breaking through the levels of USD 59.50 per barrel and completing the harmonic model as mentioned in the oil analysis here
