Oil continued to climb, but could face some consolidation.
The market reacted to the developments in the Middle East where risks of a broader conflict seem to be increasing. This threatens to disrupt oil supplies and supply routes and could lead to higher prices still.
The recent increase in the crude oil price premium reflects the market’s worries that Iran might become more directly involved in the conflict, potentially threatening the Strait of Hormuz, a key route for global oil transport.
Additionally, the decline of crude oil stockpiles in the US also contributed to support oil prices as traders hope for a stronger demand in the US. Crude markets could also benefit from softer monetary policies in the US and elsewhere in the coming months.
Lower interest rates could help support major economies and push oil demand to the upside. However, the trend of oil prices could depend on the pace of economic growth in China which has been slowing more than expected.
