The Oil Market Rallied Sharply Higher in the Afternoon Amid the Intensifying Geopolitical Tensions in the Middle East

Recap:  The oil market posted an outside trading day on Thursday after the market retraced some of its previous gains early in the session and later rallied sharply higher in afternoon trading amid the intensifying geopolitical tensions in the Middle East. The market traded mostly sideways for much of the day as it traded back below the $85.00 level and posted a low of $84.64 early in the afternoon. However, the oil market bounced off that level on news that Israeli embassies across the U.S. had been placed on high alert due to increasing threats of an Iranian attack on Israeli diplomats. On Thursday, the U.S. issued its strongest public rebuke towards Israel, with President Joe Biden calling for an immediate ceasefire in Gaza and warning that U.S. policy on Gaza will be determined by whether Israel takes steps to address the safety of Palestinian civilians and aid workers. The crude market extended its gains to over $1.70 as it rallied to a high of $87.22 ahead of the close. The May WTI contract settled up $1.16 at $86.59. The June Brent contract settled up $1.30 at $90.65 after breaching the $90.00 level for the first time since October. Meanwhile, the product markets ended higher, with the heating oil market settling up 89 points at $2.7413 and the RB market settling up 3.33 cents at $2.7942.

Technical Analysis:  on Friday, the crude market will remain well supported by continuing concerns over the possibility of widening tensions in the Middle East. Iran vowed to retaliate against Israel for an attack that killed high-ranking Iranian military personnel on Monday, while Israeli Prime Minister, Benjamin Netanyahu, said Israel will take an aggressive stance against Iran and its proxies. The market is seen finding resistance at its high of $87.22 followed by $88.29, the $90.00 level and $90.78. Meanwhile, support is seen at $85.80, $85.10, $84.64, $83.85 and $82.60.

Fundamental News:  The Wall Street Journal reported that Israel’s military scrambled GPS signals on Thursday as the country braced for possible retaliation by Iran or one of its allied militias for a suspected Israeli airstrike Monday on an Iranian diplomatic building in Syria. The attack killed a senior Iranian general and six other military officials. Israel has sporadically disrupted GPS signals since the start of its war with Hamas in early October. However, the GPS disruptions have intensified since the Monday strike in Damascus. The IDF announced that it had decided to temporarily halt leave for combat units. The head of the IDF’s Military Intelligence Directorate, Aharon Haliva, warned Israel is facing “complex days” ahead amid the increasing threats of strikes by Iran. Analysts with expertise in Iran and its elite Islamic Revolutionary Guard Corps say the chances of a direct Iranian strike on Israel are slim, particularly because Iran does not have the capabilities to defeat Israel militarily and is struggling to contain public unrest at home. Meanwhile, an adviser to Iran’s Revolutionary Guard said to expect a form of retaliation on Thursday or Friday, saying Iran would choose an action proportional to the Israeli attack in Damascus.

The White House said U.S. President Joe Biden called on Thursday for an immediate ceasefire in Gaza during a phone conversation with Israeli Prime Minister Benjamin Netanyahu. According to a White House statement, President Biden called on Israel to take immediate steps “to address civilian harm, humanitarian suffering, and the safety of aid workers” and “made clear that U.S. policy with respect to Gaza will be determined by our assessment of Israel’s immediate action on these steps.” 

Trans Mountain said it expects its expanded oil pipeline system will start commercial operations on May 1st. The company said that with the appropriate approvals from the Canada Energy Regulator and completion of remaining construction activity, Trans Mountain will commence transporting crude oil on the expanded pipeline system.

Early Market Call - as of 8:20 AM EDT

WTI - May $86.41, down 18 cents

RBOB - May $2.7838, down 1.04 cents