The benchmark crude WTI (CM:CL) dropped by nearly 0.8% to $85 today as traders maintain a cautious stance following Iran’s unprecedented attack on Israel.
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Middle East in Turmoil
The downtick in oil comes after Israel successfully thwarted Iran’s barrage of drone and missile attacks, and world leaders advocated restraint in the conflict. The Biden administration seeks to avoid any escalation in the Middle East conflict.
According to Reuters, Iran has stated that it considers its retaliation to be over. However, all eyes will now be on Israel and the West’s next steps. As the third-largest oil producer in OPEC, Iran’s actions have prompted the G-7 countries to scramble to issue a diplomatic response.
For oil markets, uninterrupted production and supply in the Middle East currently suggest a cooling down of last week’s heightened risk scenario, at least for now. However, oil prices have risen by around 20% so far this year, and the risk premium could persist in the coming weeks.
This could potentially mean oil resuming its northward trajectory. According to Bloomberg, Citigroup predicts oil prices heading upward of $100 per barrel if the conflict in the Middle East continues. Meanwhile, OPEC’s production cuts remain in place, and the organization’s upcoming meeting at the beginning of June could significantly impact oil prices.
Will Crude Oil Go Up?
Amid this high-voltage scenario, the TipRanks Technical Analysis tool indicates strong momentum in oil prices with a Strong Buy signal.
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