Oil Prices Near Peak, Geopolitical Risks Provide Short-Term Support Amid Medium-Term Pressures
Crude oil in the US market slightly declined during the Asian trading session, trading around $71.15 per barrel. Last week, oil prices rose by more than 6%, recovering previous losses on a weekly basis, yet bullish momentum remains weak. Although the intensified Russia-Ukraine conflict has heightened geopolitical tensions raising market concerns about supply interruptions, the continued weakness in medium-term demand and the strengthening US dollar continue to exert pressure on oil prices. Analysts generally believe there is limited room for oil prices to break upward, with a risk of price pullback still present.
Geopolitical Tensions Increase Oil Price Volatility
The escalation of the Russia-Ukraine conflict has once again become a significant driver behind rising oil prices. After Kyiv used missiles to strike deep targets in Russia, Moscow intensified its military operations against Ukraine. Russian President Putin stated that new Oreshnik hypersonic missile systems would continue to be tested in combat, blaming Ukraine and its Western supporters for escalating the situation. Russia's permanent representative to international organizations in Vienna warned that France and the UK would face consequences for allowing Ukraine to use cruise missiles against targets within Russia.
Ole Hansen, an analyst at Saxo Bank, stated that the geopolitical tensions caused by the escalation of the Russia-Ukraine conflict have surpassed levels seen during the armed conflict supported by Iran in Israel. This geopolitical uncertainty has increased oil price volatility, though it has not established a clear bullish trend.
Technical Aspect: Insufficient Bullish Momentum, Oil Price Faces Key Support Test
Technically, US crude oil has wiped out previous weekly losses, showing short-term upward momentum in its pattern. However, daily charts enter a dense pressure range, with moving averages yet to turn upward, indicating limited upward momentum. Should oil prices retest and break below $70, they might return to range-bound trading, testing the lower bound support of the box. Analysts pointed out that although geopolitical tensions bring short-term fluctuations, the expectation of weak demand and abundant supply will limit long-term gains.
Market Outlook: Demand and Policy Remain Key Variables
Fundamentally, the market needs to closely monitor further developments in geopolitical tensions and the upcoming EIA inventory data and Federal Reserve meeting minutes to be released this week. The trend of the US dollar index will be another significant factor of influence; if the dollar continues to strengthen, it might exert medium-term pressure on oil prices. Additionally, the market's pessimistic outlook on global oil demand remains one of the predominant factors. In the medium term, geopolitical risks may gradually recede, and the supply-demand fundamentals will once again become decisive factors for pricing.
Economic Impact: Increased Volatility Could Affect Energy Market Stability
The escalation of geopolitical risks has intensified volatility in the crude oil market, having profound impacts on both energy-importing and energy-exporting countries. In the short term, rising oil prices may increase energy costs for importing countries, further exacerbating inflation pressures; however, for countries relying on energy exports, the supply premium induced by geopolitical tensions might improve their fiscal revenue.
Meanwhile, the expectation of weak demand highlights uncertainties in global economic recovery, and repeated fluctuations in oil prices could negatively impact corporate investments and consumer behavior. As Federal Reserve policies and economic data gradually become clear, the market must be vigilant about potential impacts of dramatic price swings on the stability of the global energy market.
While oil prices are driven up in the short term by geopolitical scenarios, weak demand and a strong dollar remain the primary factors suppressing long-term gains. The market needs to pay close attention to inventory data, geopolitical risks, and policy dynamics to manage potential price adjustments.
