Middle East supply risks lift WTI above $101.00

• At close to $101.20, WTI trades sharply higher in early Asian dealing on Thursday.
• WTI gains support from an attack on a Saudi Arabian refinery and concerns over a possible US strike on Iran after the US midterm elections.
• The EIA reported a 1.462 million-barrel decline in crude oil stocks for the week ended 23 October.

Around $101.20 is where West Texas Intermediate (WTI), the US crude oil benchmark, is trading in Thursday’s early Asian session. Renewed fears of further disruption to Middle Eastern energy supplies are lifting WTI.

Following a warning from Yemen’s Iran-aligned Houthis to evacuate Aden airport, the group attacked the facility on Wednesday, Reuters reported. A day earlier, on Tuesday, the Houthis said they had fired a ballistic missile towards the Ras Tanura oil refinery in eastern Saudi Arabia, the kingdom’s largest refinery.

Several Middle Eastern countries and regional allies have been advised by US officials to prepare for a possible resumption of military action against Iran after next week’s US midterm elections. The warning also covered the possibility of Iran attempting to retaliate against those countries.

Dennis Kissler, senior vice president of trading at US financial services firm BOK Financial, said: "Crude futures once again pricing in nearer term tighter supplies on news the US is likely to re-start military operations soon, which could be more intense than in the past given the latest attacks on Saudi Arabia and other Middle East allies,"

A 1.462 million-barrel draw in US crude stocks in the week ending 23 October exceeded the market consensus for a 300,000-barrel decline, figures from the Energy Information Administration (EIA) showed. Inventories had fallen by 3.061 million barrels the previous week.

Crude retains an upward bias as Middle East risks and freight costs lend support

Elevated geopolitical risks should underpin crude oil prices in the near term, according to TD Securities. The bank expects that "crude oil will remain skewed to the upside in the near term as escalation risk ahead of Israeli elections and US midterm elections remains elevated." Explaining the geopolitical risk premium already reflected in prices, its analysts note that "recent Houthi strikes have seen risk premium pricing in the market increase, while persistent tanker attacks by Iran appear to have been successful in reducing some Hormuz flows,"

Freight costs are also playing a growing role, TD Securities says, observing that "beyond escalation in the Middle East conflict, freight rates have increasingly become the important marginal driver, with elevated landed prices for refiners potentially putting a cap on crude oil upside as weaker margins may limit refiner runs." The analysts see rising freight costs and heightened geopolitical uncertainty as supportive of crude, although the squeeze on refining margins could restrain further price gains.

Technical Analysis: WTI holds a positive bias above the 100-day SMA

WTI US Oil’s advance on the daily chart leaves it comfortably above both the 20-day Bollinger simple moving average and the 100-day simple moving average (SMA). With prices pushing into the upper half of the Bollinger envelope, the near-term bias remains firmly bullish. A Relative Strength Index (14) reading of 63 is in bullish territory without reaching overbought levels, indicating positive upside momentum that is not yet excessively stretched.

The upper Bollinger band, around $104.00, marks the first resistance area, where profit-taking could start to check the recent strong advance. Initial support lies at the psychological $100.00 level. Below that, the middle Bollinger band near $95.10 precedes the lower band at roughly $86.15. A break beneath the latter could bring the 100-day SMA around $85.15 into view. These levels would be expected to draw buying on dips as long as the broader uptrend holds.

(The technical analysis of this story was written with the help of an AI tool. Know more.)