Oil Price Jump on Geopolitical Tension Despite OPEC Raise Oil Supply

 Key Takeaways:

*Crude Oil prices jump on the back of escalating Ukraine-Russia tension. 

*OPEC raised oil supply by 410,000 barrels per day in July.

Crude oil prices opened the week with strong gains as escalating geopolitical tensions in Eastern Europe raised concerns about potential supply disruptions from Russia, one of the world’s largest oil producers. The market’s risk premium expanded following Ukraine’s bold drone attacks on Russian infrastructure, including strikes that caused train derailments and civilian casualties. These developments cast doubt on the prospects for successful peace talks scheduled in Istanbul, heightening uncertainty in energy markets.

While geopolitical risks supported prices, market participants remained cognizant of OPEC+’s planned production increase of over 400,000 barrels per day beginning in July, which could exert downward pressure on prices in the coming months. However, the producer group sought to reassure markets by emphasizing steady global economic growth and healthy oil market fundamentals, pointing to current inventory levels as evidence of balanced conditions. This messaging helped mitigate concerns about the planned output hike, which would bring production to its highest level in 2025.

The oil market currently reflects these competing forces – geopolitical tensions providing upside support while anticipated supply increases and demand considerations create headwinds. Traders will continue to monitor both the evolving situation in Eastern Europe and OPEC+’s production strategy for clearer directional signals in the weeks ahead. The interplay between these factors suggests potentially volatile trading conditions may persist in the near term.

Technical Analysis

USOIL, H4

Oil prices surged nearly 3% in early-week trading, breaking out decisively from a descending triangle pattern and surpassing the key resistance level at $61.25. This technical breakout signals a potential bullish reversal, suggesting renewed upward momentum may be building in the energy markets.

While the price action has turned constructive, momentum indicators currently reflect a more neutral stance. The Relative Strength Index (RSI) remains near the 50 level, indicating balanced buying and selling pressure, while the Moving Average Convergence Divergence (MACD) continues to hover flat along the zero line, showing a lack of strong directional conviction.

The breakout above $61.25 is particularly significant as it confirms a shift in market structure, but traders will be watching for follow-through buying to validate the bullish signal. Should momentum indicators begin to turn upward in conjunction with the price breakout, it could reinforce the case for a sustained rally.

Resistance levels: 64.50, 66.55

Support levels: 60.00, 58.10