Middle East Fears Boosting Price

Oil prices remain supported into the weekend with crude futures finishing the week firmly higher as fears of a fresh US/Iran escalation take hold. There have been fresh reports that the US and Israeli military are drawing up plans to launch a fresh offensive against Iran after the US midterms in a fortnight’s time. There has been plenty of speculation recently that Trump has been holding off on fresh attacks ahead of the midterms and the prospect of a new wave of violence holds severe upside risks for crude prices, particularly given that they are still holding at elevated levels and haven’t seen any meaningful, or at least sustained, correction recently.

Improving Output Levels

This news flow is offsetting the bearish impact of recent news that oil flows out of the Middle East have recovered to pre-war levels. Indeed, even flows through the Strait of Hormuz have rebounded firmly, despite ongoing attacks on vessels passing through the channel. News of intensified fighting between Saudi Arabia and Houthi militants remain a key threat to watch, however. Over the weekend, Houthis struck a key oil field in Saudi Arabia and have also hit a port in the Red Sea. As such, the threat to supply remains ongoing and while that backdrop remains, oil prices look vulnerable to continued upside near-term.

Technical Views

Crude

The rally in crude has seen price breaking firmly above the 95.06 level, following the rebound higher off the bull channel lows. While that region holds as support focus is on a fresh test of 104.26 and a continuation higher towards 108.73 next.