US/Iran Fears

Oil prices are starting the week a little softer with the crude futures market in the red so far following a retreat from Friday’s highs. The market ended last week firmly higher as fears of a fresh escalation in the US/Iran war drove prices higher. Ongoing tensions between Saudi Arabia and Houthi militants as well as continued strikes on ships in the Strait of Hormuz are also keeping prices underpinned here. Last week, Trump warned that the US was not engaged in negotiations with Iran and said that further action would be taken ‘fairly soon’. This follows recent reports that the US and Israel are currently planning fresh operations to be carried out after the US midterms next week. Against this backdrop, it’s difficult to see oil prices making a meaningful correction anytime soon. Instead, prices remain vulnerable to fresh upside spikes on nay incoming news suggesting further attacks to come.

Saudi Attacks Continue

Alongside US/Iran tensions, ongoing attacks on Saudi Arabia from Houthi militants also posing an upside risk to oil prices. The Houthis have recently hit key energy infrastructure including oil fields and distribution sites, as well as shipping ports and airports leading to the US ordering non-essential personnel to leave. While this backdrop remains, oil prices look set for continued upside near-term with heavier upside seen in the event of any development such as the closure of any key energy infrastructure such as the East-West pipeline.

Technical Views

Crude

Crude prices remain capped by the 104.26 level for now following the latest push higher off the 95.06 level. While within the bull channel, focus is on a continuation higher with 108.73 the next bull target to note. Only a break of 95.06 will negate the bullish view, turning focus to 87.55 as next support to note.