Crude oil price held steady on Friday, with Brent ending the week at $104.5 and the West Texas Intermediate (WTI) hitting $93. Brent has jumped by nearly 10% from its lowest level this month, and this recovery may continue as the Middle East erupts.
Houthi and Saudi Arabia crisis escalates
Crude oil prices reacted mildly to a statement by President Donald Trump, who announced that Russia would supply tons of oil to the global markets. His goal is to lower diesel prices ahead of the US midterm elections.
Oil prices reacted mildly to this announcement because of the limited impact in the oil market. At the same time, Russia does not have all this oil to sell because Ukraine has intensified its attacks against its infrastructure. Indeed, it has maintained a ban on diesel exports.
The main risk that the oil markets faces is that the Saudi Arabia and Houthi crisis is escalating. Houthi launched another attack towards the biggest Saudi airport on Saturday, killing 12 people and seriously injuring 300.
The attack came as Saudi Arabia and the Yemeni government continued to battle Houthis in a bid to retake key locations in the country.
At the same time, there are concerns that Iran will launch an attack against the United States targets ahead of the midterm elections. Its goal will be to push oil prices higher ahead of the elections.
Even if the “October Surprise” fails to happen, there are concerns that the US will attack Iran after the election happens. Odds of an attack will jump if Republicans win or lose the election. If they win, it will help Trump to justify the Iran war. If Democrats wins, he may use the attacks to distract.
The next phase of the US-Iran war may be more damaging since the US may decide to target critical infrastructire. If this happens, Iran has warned that it will retaliate by hitting key energy targets in the region. It can hit refineries and terminals in countries like Saudi Arabia, UAE, Qatar, Kuwait, and Bahrain.
These developments are happening as global oil stocks remains under pressure. Just last week, the head of Saudi Aramco warned that global stocks were in dangerously low levels.
Brent crude oil price technical analysis
Brent crude oil price chart | Source: TradingView
The daily chart shows that Brent has jumped in the past few months. It soared from a low of $70 in July to the current $104.53. It has remained above the ascending trendline that links the lowest swings since July, a sign that bulls remain in control.
The price has also found substantial support along the 50-day Exponential Moving Average (EMA). It also sits above the Supertrend indicator, a sign that bulls have prevailed.
Therefore, the path of the least resistance for crude oil is bullish, with the next key target to watch being at $109.96, its highest point on September 11. A move above that level will point to more gains towards $119.
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