Oil prices rose slightly due to Middle Eastern tensions and China’s stimulus initiatives, despite concerns about global demand and trade tariffs impacting future prices. Brent reached $71.24, and WTI reached $67.72 amid hopes of economic recovery in China and geopolitical unrest.

On Tuesday, oil prices experienced a slight increase, buoyed by geopolitical tensions in the Middle East and supportive economic data and stimulus plans from China. Brent futures rose by 17 cents to $71.24 per barrel, while U.S. West Texas Intermediate crude futures climbed 14 cents to $67.72 per barrel.

ING analysts indicated several factors contributing to market support, including U.S. military actions against the Houthis in Yemen. They noted, “China unveiled plans to revive consumption, while Chinese retail sales and fixed asset investment growth came in stronger than expected.” A recent action plan from China’s state council includes measures aimed at increasing household income and childcare support.

Investor optimism was also bolstered by economic data from China, which showed that retail sales grew faster than anticipated in January-February, despite a decline in factory output and an increase in the urban jobless rate to a two-year high. Additionally, crude oil processing in China, the world’s largest crude importer, increased by 2.1% over the same period, aided by new refinery capacity and holiday travel.

Support for oil prices has been reinforced by President Donald Trump’s commitment to continue military operations against the Houthis unless they cease attacks on maritime vessels. The ongoing Israel-Palestinian conflict further complicates the situation, with reports of significant casualties from Israeli airstrikes in Gaza, signaling heightened instability.

Despite these factors, concerns about global oil demand persist. The OECD warned that Trump’s tariffs could hamper economic growth in North America, subsequently impacting global energy demand. Robert Rennie of Westpac remarked, “With global supply surging and tariffs and trade wars set to hit global demand, we remain of the view that prices will head lower and eventually reach the mid $60s.”

Adding to the global supply dynamic, Venezuela’s PDVSA has developed three operational plans to maintain oil production and exports from its joint venture with Chevron,even after the expiration of the U.S. company’s license next month. Meanwhile, discussions between Trump and Russian President Vladimir Putin concerning the Ukraine war also remain a focal point, as potential peace negotiations could lead to a relaxation of sanctions on Russia and the return of its crude oil to global markets, further influencing oil prices.

In summary, oil prices have edged upward due to geopolitical tensions and positive economic indicators from China. However, significant risks to global demand remain, particularly due to tariffs and trade disputes, which could ultimately lead to declining prices. The situation is compounded by international negotiations that may further impact oil supply and market stability.

Original Source: www.tradingview.com

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