By Maria Agustina Patti, Financial Markets Strategist Consultant to Exness
Oil prices extended their rebound for a third consecutive session on Wednesday on escalating geopolitical tensions in the Middle East. A key catalyst for today’s gains is the heightened tensions in the Middle East, which saw an expansion of the geographic scope of the ongoing conflict. Such events could introduce an additional risk premium into the market, as traders could factor in the potential for a wider regional conflict that could disrupt energy supplies. While the initial price spike from the news saw a slight pullback, the underlying threat continues to support higher prices.
Bolstering this bullish sentiment is the recent decision by the OPEC+ coalition. The group agreed to a modest production increase for the upcoming month, an amount significantly smaller than the hikes implemented in previous months. This cautious approach signals that major producers are keen on keeping the market tight, providing some fundamental floor for prices.
However, not all indicators are pointing upward. The latest data from the American Petroleum Institute (API) revealed a crude inventory build of 1.25 million barrels, showing inventories rose for a second week. Market participants are now keenly awaiting the weekly report from the US Energy Information Administration (EIA) today. It will be closely scrutinized to confirm the supply and demand picture, likely serving as the main catalyst for the market’s move today.