Oil Prices Jump Over 2 Percent on Geopolitical Tensions and Interest Rate Optimism

Oil Prices Jump Over 2 Percent on Geopolitical Tensions and Interest Rate Optimism

VoM News Desk | December 27, 2023 | 11:48 AM IST | Energy | Follow on Google News

Oil Prices Jump Over 2 Percent on Geopolitical Tensions and Interest Rate Optimism/Reuters

Oil Prices Jump Over 2 Percent on Geopolitical Tensions and Interest Rate Optimism

Oil prices experienced a significant increase on December 26, 2023, due to a combination of factors, including Middle East strife and investor optimism about the US Federal Reserve cutting interest rates. Brent crude futures rose by 2.3% to $80.86 per barrel, while US West Texas Intermediate crude futures increased by 2.6% to $75.45 per barrel.

Factors Driving Oil Prices

1. Geopolitical tensions: The ongoing conflict between Israel and Hamas, as well as Houthi attacks on ships in the Red Sea, have disrupted global shipping and trade, leading to concerns about supply disruptions. However, actual supply has not been significantly affected, with Maersk announcing the restart of shipping routes through the Red Sea.
2. Interest rate optimism: Lower interest rates can boost economic growth and oil demand. Analysts believe that expectations of the Fed cutting interest rates next year could contribute to the recent rally in oil prices.

Market Outlook

Oil prices are expected to remain dynamic, with support levels identified at $73.10–72.30 and resistance levels at $74.50-75.10 for the current session. In terms of INR, crude oil finds support at ₹6,070-5,960 and encounter resistance at ₹6,240-6,320. Rahul Kalantri, VP Commodities at Mehta Equities Ltd, suggests that oil prices could remain range-bound in the near term, with a potential decline due to the aforementioned factors.

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