West Texas Intermediate (WTI) US Crude Oil prices tick higher during the Asian session on Tuesday and for now, seem to have stalled the previous day's rejection slide from the 100-day Simple Moving Average (SMA) or a nearly two-month peak.
A further escalation of geopolitical tensions in the Middle East continues to fuel supply concerns and turns out to be a key factor acting as a tailwind for the black liquid. A deadly drone attack on a US base in Jordan by Iran-backed militants killed three American soldiers, marking the first death of US service personnel in the region since the Hamas-Israel war broke out on October 7. Reports suggest that President Joe Biden will authorise US military action, which would begin in the next couple of days and come in waves against a range of targets.
A direct US confrontation with Iran, which exported around 1.2-1.6 million barrels per day or 1-1.5% of Crude Oil through most of 2023, will adversely impact global supply. Adding to this, an attack on an oil tanker in the Red Sea over the weekend has raised the risks of supply disruptions in the region and might continue to lend some support to Crude Oil prices. That said, the lack of follow-through buying suggests that bulls seem reluctant to place aggressive bets in the wake of demand concerns in China – the world's top Oil importer.
Market participants might also prefer to wait on the sidelines ahead of the highly-anticipated two-day FOMC monetary policy meeting starting this Tuesday. Investors will look for cues about the timing of when the Federal Reserve (Fed) will start cutting interest rates. This, in turn, will influence the US Dollar (USD) price dynamics and drive demand for the USD-denominated commodities. In the meantime, the American Petroleum Institute (API) industry group will publish US stockpile data on Tuesday and provide some impetus to Crude Oil prices.