Middle East supply risks push WTI above $101.00

• WTI surges towards $101.20 during early Asian trading on Thursday.
• WTI gains support from a Saudi Arabian refinery attack and concerns over a possible US strike on Iran following the US midterm elections.
• EIA data showed a 1.462 million-barrel decline in crude oil inventories for the week ended 23 October.

Fresh fears of further disruptions to Middle Eastern energy supplies are lifting West Texas Intermediate (WTI). The US crude oil benchmark is trading near $101.20 in Thursday’s early Asian session.

Following an evacuation warning from Yemen's Iran-aligned Houthis, the group attacked Aden airport 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 East 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 officials also warned of the possibility that Iran would seek to retaliate against them.

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 larger-than-anticipated drawdown in US crude inventories was recorded last week. Energy Information Administration (EIA) figures showed that stockpiles fell by 1.462 million barrels in the week ending 23 October, following a 3.061 million-barrel reduction in the preceding week. Markets had expected a decline of 300,000 barrels.

Can Middle East risks and freight costs sustain crude’s upside bias?

Near-term support for crude prices is likely to persist, 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 premium reflected in current 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 assuming a greater role, according to TD Securities, which observes 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 bank’s view is that rising freight costs and elevated geopolitical risks are underpinning crude prices, although pressure on refining margins could restrain further gains.

Technical Analysis: Can WTI Sustain Its Positive Outlook Above the 100-Day SMA?

WTI US Oil continues to climb on the daily chart, trading comfortably above both the 20-day Bollinger simple moving average and the 100-day simple moving average (SMA). With prices moving into the upper half of the Bollinger envelope, the near-term bias remains firmly bullish. A Relative Strength Index (14) reading of 63 also points to bullish conditions without reaching overbought territory, indicating positive upside momentum that is not yet excessively stretched.

The upper Bollinger band near $104.00 marks the first resistance level, where the latest sharp advance could encounter profit-booking. Immediate support lies at the psychological $100.00 mark, ahead of the middle Bollinger band around $95.10 and the lower Bollinger band near $86.15. A break below the latter could bring the 100-day SMA around $85.15 into focus. 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.)