Summary:
Oil prices rose Tuesday as the U.S. plan to buy 3 million barrels for SPR offered support, with Middle East developments remaining a key market focus.
Oil prices edged up on Tuesday as a US plan to purchase up to 3 million barrels of oil for SPR provided support. Developments in the Middle East remain the market focus.
Both benchmark contracts tumbled 6% in the previous session, hitting their lowest since 1 Oct, after Israel's retaliatory strike on Iran at the weekend bypassed Tehran's oil infrastructure.
Washington has warned Iran at the United Nations Security Council of "severe consequences" if it undertakes any further aggressive acts against Israel or US personnel in the Middle East.
Citigroup's commodities team on Sunday cut its short-term Brent crude price target by $4 to $70 per barrel and raised the probability of the base case scenario by 10% to 70%, citing "lower risk premium".
The bank did not rule out a bullish scenario that would have Brent rising as high as $120, but put the odds of that at no more than 10%. Iran accounts for up to 4% of global oil supplies, according to the EIA.
It has said that after reviewing major geopolitical risk events since the 1950s, the main takeaway was that historical events that potentially or actually impact oil supply do not tend to persist for longer than a few quarters at most.
The oil rally is too moderate to negate the bearish bias with support around $70. A decline towards $68.5 is on the cards if the psychological level is lost again. 200 SMA remains the key resistance.
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