FX.co ★ CL/Crude Oil

U.S. West Texas Intermediate crude oil prices rose to around $101.20 a barrel in early Asian trading on Thursday amid growing concerns about potential energy supply disruptions in the Middle East. Earlier, Reuters reported that Yemen's Houthi armed forces (allied with Iran) attacked Aden airport on Wednesday, shortly after issuing a warning to evacuate the airport. This news heightened geopolitical tensions. On Tuesday, the Houthis claimed to have attacked Ras Tanura, Saudi Arabia's largest oil refinery, with ballistic missiles. Adding to the uncertainty, U.S. officials have instructed several Middle Eastern allies to prepare for a possible new round of military action against Iran following next week's U.S. midterm elections, as well as for potential Iranian retaliation against regional partners. Dennis Kessler, senior vice president of trading at BOK Financial, noted that while the market is digesting the news that the U.S. may escalate military action, crude oil futures prices are once again reflecting expectations of a short-term supply shortage. Given the recent attacks on Saudi Arabia and regional infrastructure, this military operation could be more intense than in the past. Additionally, domestic supply indicators also provided key support. The U.S. Energy Information Administration (EIA) reported that crude oil inventories fell by 1.462 million barrels in the week ending October 23, significantly exceeding market expectations of a 300,000-barrel decline, but less than the 3.061 million-barrel drop the previous week. From an institutional market perspective, commodity strategists at TD Securities are bullish on the short-term outlook for crude oil, asserting that oil prices remain in an upward trend as escalation risks persist from the upcoming Israeli political cycle and the U.S. midterm elections. Analysts at TD Securities noted that recent attacks by Houthi armed forces have significantly increased market risk premiums, while Iran’s ongoing attacks on commercial oil tankers have successfully disrupted shipping through the Strait of Hormuz. Beyond direct geopolitical conflicts, TD Securities believes that shipping rate dynamics are a key factor influencing oil price trends. Analysts noted that higher crude oil prices for global refineries may ultimately limit further price increases, as tighter refining margins could force refineries to reduce processing volumes. However, the combination of rising geopolitical risk premiums and higher shipping rates provides a strong benchmark for crude oil prices, even if pressure on refining margins limits excessive gains in oil prices. From a technical analysis perspective on the daily chart, West Texas Intermediate (WTI) crude has maintained strong upward momentum recently. The price is significantly above the 20-day simple moving average (SMA) (the middle of the Bollinger Band) and the 100-day SMA, and is moving towards the upper Bollinger Band. Technical momentum indicators reflect continued buying strength, but there are no signs of significant weakness. The 14-day Relative Strength Index (RSI) is at 63, indicating strong bullish momentum, while still below the overbought threshold of 70. On the upside, immediate technical resistance lies at $104, near the upper Bollinger Band, where the current strong rally could face profit-taking from short-term traders. On the downside, initial dynamic support is at the psychological level of $100. Should the price fall below $100 now, technical attention will shift to secondary support near the middle Bollinger Band at $95.10, followed by support near the lower Bollinger Band at $86.15 and the 100-day moving average at $85.15. As long as the overall multi-month uptrend remains structurally intact, these lower structural moving averages are expected to attract institutional investors to buy the dip.