Multiple Geopolitical Risks - And Trump - Drive Volatile Oil Trading

Meanwhile, U.S. Fed may change rates after all, says analyst: File Image/Pixabay

Oil prices on Tuesday seesawed between two-week highs and a more moderate easing, due 
to the end of the ceasefire between Israel and Hamas and then U.S. president Donald Trump's discussion with Russian president Vladimir Putin on a possible end of his three-year war with Ukraine.

As of 1633 GMT, Brent dipped 52 cents to $70.55 per barrel, while West Texas Intermediate fell 66 cents to $66.92.

Crude trading was pushed into both bullish and bearish territories on Tuesday due to a host of geopolitical developments: Israel's air strikes in Gaza reportedly killed over 400 people, while in Yemen Trump declared he would hold Iran responsible for any attacks carried out by the Houthis unless they end their attacks on ships in the Red Sea.

Samer Hasn, senior market analyst at XS.com, said in an email, "A potential escalation with Iran is precisely what could cause long-term disruption in the oil market.

"As tensions between Iran and the United States escalate to the point of direct military conflict, two scenarios could emerge if a historic agreement is not reached - which remains highly unlikely - such as tightening strict restrictions on Iranian oil exports ... or targeting either nuclear energy facilities….if the situation spirals out of control and we face a direct military escalation against Iran, this could involve targeting oil facilities and supply lines, whether in Iran itself or the region."

As for Trump's breakthrough in conversing with Putin, PVM stated in a note that even if a peace deal were brokered, "Russian fossil fuels might at some stage resurge in abundance without sanction shackles, but ... (that) does not mean the energy largesse will be lifted."

Meanwhile, China reported a quickening of retail sales growth in January-February; but this was contrasted by tariffs and labour shortages threatening the recovery of the U.S. single-family homebuilding sector, which rebounded sharply in February.

Also, DTN Oil Update reported that traders will be monitoring the Federal Reserve meeting scheduled for Tuesday and Wednesday, when a decision on interest rates will be reached; the Fed has stated it is in no rush to cut rates because the economy is doing well, "However, the Fed's decision could change due to inflationary pressures on the U.S. economy caused by punitive tariffs imposed by the Trump administration on its main trade partners in recent weeks."

Given all these factors, technical analyst James Hyerczyk pointed out that 'Traders should watch for key technical levels, with a break above $70 signalling further upside, while renewed selling pressure could push prices back toward the mid-$60s."