WTI climbs above $101.00 on Middle East supply risks

• WTI price jumps to near $101.20 in Thursday’s early Asian session.
• An attack ‌on a refinery in Saudi Arabia and worries that the US could strike Iran after US midterm elections boost the WTI price.
• Crude oil inventories fell by 1.462 million barrels in the week ended October 23, EIA said.

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $101.20 during the early Asian trading hours on Thursday. WTI rises amid renewed concerns about additional energy supply disruptions in the Middle East.

Reuters reported that Yemen's Iran-aligned Houthis attacked Aden airport on Wednesday after the Iran-aligned group warned people to evacuate the facility. On Tuesday, the Houthis said that they had launched a ballistic missile toward the Ras Tanura oil refinery in eastern Saudi Arabia, the kingdom’s largest refinery.

US officials have told several Middle East countries and regional allies to be prepared for potential renewed military action against Iran after next week’s midterm elections in the US, as well as the possibility that Iran will attempt to retaliate against them.

"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," said Dennis Kissler, senior vice president of trading at US financial services firm BOK Financial.

US crude oil inventories declined by more than expected last week. According to the Energy Information Administration (EIA), crude stockpiles dropped by 1.462 million barrels in the week ending October 23, compared to a fall of 3.061 million barrels in the previous week. The market consensus was for a decline of 300,000 barrels.

Middle East risks and freight costs keep crude skewed to the upside

According to TD Securities, crude oil prices are likely to remain supported in the near term, with the bank expecting 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." The analysts highlight 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," reinforcing the geopolitical risk premium embedded in current pricing.

TD Securities also points to freight dynamics as an increasingly important factor, noting 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." In their view, the combination of heightened geopolitical risk and rising freight costs is supporting crude, even as pressure on refining margins may temper the extent of further gains.

Technical Analysis: WTI maintains a constructive outlook above the 100-day SMA

In the daily chart, WTI US Oil extends its advance well above the 20-day Bollinger simple moving average and the 100-day simple moving average (SMA), keeping the near-term bias firmly bullish while prices press into the upper half of the Bollinger envelope. The Relative Strength Index (14) at 63 leans into bullish territory but stays shy of overbought, suggesting upside momentum is constructive yet not excessively stretched.

On the topside, initial resistance is aligned with the upper Bollinger band around $104.00, where the recent impulsive leg could begin to meet profit-taking. On the downside, immediate support level is seen ath the $100.00 psychological level, followed by the mid-Bollinger band near $95.10 and the lower limit Bollinger band at roughly $86.15. A breach of this level could expose the 100-day SMA around $85.15, levels that would be expected to attract dip-buying while the broader uptrend remains intact.

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