Crude oil analysis: WTI hits $75 as demand weakens and dollar strenghtens

• Geopolitics support oil in adverse conditions
• Key risks facing oil: weaker demand and strengthening US dollar

Crude oil managed to recover from earlier weakness and moved slightly higher in the session. The increase in geopolitical risks in the Middle East has been keeping oil prices positive this month after a 3-month decline in the last quarter of 2023. The price of WTI was once again testing a significant resistance level around $75. However, it's uncertain if these gains will last because breaking through this level has been challenging. There are also concerns about demand, which is limiting the increase in prices despite OPEC+ holding back supplies. Traders who are optimistic about the market might want to wait for a clear rise above $75 for confirmation. But there is also a possibility that prices could fall from here instead.

Key risks facing oil

Geopolitics: The tensions and violence in the Middle East is maintaining support for oil prices when market conditions suggest otherwise. At the same time, the stock market, particularly in the US, has been doing well. This week, three major US stock indices reached new record highs as the technology-driven rally continues. The positive attitude in the stock market is also encouraging interest in other risky investments, including crude oil.

One factor affecting commodities is the rising dollar, which makes goods priced in USD more costly for foreign buyers. If the dollar continues to strengthen, it could potentially harm crude oil.

Strenghtening dollar: Another concern for crude oil is economic data, particularly forward-looking indicators that suggest subdued economic activity globally, especially in the manufacturing sector.

US Economy: Today, the only economic data from the US was the Richmond Fed Manufacturing index. It provided insights into the state of the manufacturing sector before tomorrow's official global PMIs. The index came in at -15, worse than the expected -7 and lower than the previous reading of -11. A reading above 0 indicates improving conditions, while below indicates worsening conditions. In the Richmond area, conditions have been deteriorating in recent months, which raises concerns for the broader manufacturing PMI data scheduled for release tomorrow.