Oil dropped below $90 a barrel after Israel said it would remove some troops from Gaza, with crude’s recent rally now facing technical resistance as geopolitical friction shows signs of easing.
Global benchmark Brent rallied to a five-month high last week on escalating tensions in the Middle East and supply shocks, raising the prospect of the global benchmark reaching triple figures. But Brent surged into overbought territory on the 9-day relative strength index, signaling prices are poised to fall. Meanwhile, algorithms for crude futures have reached their maximum long positions, according to traders.
Israel said on Sunday that the country is pulling some troops from southern Gaza, with the forces recuperating and preparing for future operations, including an offensive on Rafah. Still, reports suggested there has been no progress in ceasefire negotiations taking place in Cairo. Iran is also preparing a response to a suspected Israeli attack on its consulate in Syria.
The broader outlook remains indicative of rising prices. Timespreads are strong, volatility has recovered, and funds are going long on crude. On Friday, volume for bullish oil call options — which profit when prices gain — was at the second-highest level on record.
The geopolitical issues have added bullish momentum to a market that has been grappling with robust demand and patches of supply issues. Over the weekend, there was a fire at one of Mexico’s oil platforms, killing one person and injuring nine. The country already had planned to reduce some of its crude exports in the coming months.
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