Brent crude oil saw a slight increase in price on Tuesday as concerns over instability in the Middle East and China’s plans for economic growth boosted the market.
However, worries about global economic slowdown, U.S. tariffs, and uncertain Ukraine ceasefire talks limited the gains.
Oil prices climbed as Brent crude traded near a key resistance level of $71.35, with analysts expecting further increases if this level is broken.
An analysis by Economies.com noted, “We expect Brent crude oil to gain further in the upcoming sessions, particularly if it manages to break the resistance at $71.35. Following a successful breakout, the next target is the resistance level at $73.60.”
Experts also pointed out that support at $70.00 would need to hold for oil to continue its upward trend.
Several factors helped oil prices stay strong, including U.S. military actions against Yemen’s Houthis, who have been disrupting shipping in the Red Sea.
Analysts at ING stated, “Along with U.S. strikes on the Houthis in Yemen, several factors provided support to the market. China unveiled plans to revive consumption, while Chinese retail sales and fixed asset investment growth came in stronger than expected.”
China’s government announced a special action plan to boost domestic consumption, offering support such as higher incomes and childcare subsidies. This move increased confidence in China’s economy, which plays a key role in global oil demand.
In the Middle East, tensions between Israel and Palestine continued to escalate. Israeli airstrikes in Gaza killed at least 200 people, according to Palestinian health officials. The fresh attacks ended a period of ceasefire talks that had been in place since January.
Meanwhile, in the Ukraine war, discussions between former U.S. President Donald Trump and Russian President Vladimir Putin on a potential ceasefire were closely watched.
Market analysts believe a peace deal in Ukraine could lead to Russia’s return to global oil markets, increasing supply and putting downward pressure on prices.
Despite the rise in oil prices, some experts warn that global energy demand could weaken due to economic uncertainties.
The OECD recently reported that Trump’s new tariffs on imports could slow down growth in the U.S., Canada, and Mexico, which may reduce oil demand.
Additionally, Venezuela’s PDVSA is preparing to continue oil production and exports with Chevron, even after the U.S. company’s license expires next month. This move could further increase global oil supply.
With increasing supply and economic risks ahead, some analysts predict oil prices may decline in the long run.
Robert Rennie, head of commodity and carbon strategy at Westpac, warned, “With global supply surging and tariffs and trade wars set to hit global demand, we remain of the view that prices will head lower and eventually reach the mid-$60s.”
For now, oil prices remain supported by ongoing geopolitical risks and economic developments, but uncertainty over global demand continues to weigh on the market.
