Crude Spikes As Saudi Pipeline Shuts Down
Middle East Tensions Flaring
Oil prices remain elevated at the start of the week as the broadening conflict in the Middle East intensifies further. Yesterday, Iran-back Houthi militants launched further strikes against Saudi Arabia as well a ships in the Gulf region. Over the weekend, Saudi Arabia took the decision to suspend work on the East-West oil pipeline amidst the growing risk from the Houthis. The suspension of this work leading to the temporary shutdown of the pipeline has significant ramifications for global oil flows given that the pipeline transports around 7 million barrels per day. Additionally, planned Talks between Iran and several Gulf nations aimed at establishing a shipping corridor through the Strait of Hormuz were cancelled as tensions continued to rise.
Bullish Risks Remain
With the conflict in the Middle East showing no signs of abating, oil prices look vulnerable to further upside near-term. The US and Iran remain locked in conflict with neither side looking willing to resume peace talks for now. Unless we hear news of a fresh ceasefire and or a return to negotiations, there is little reason for oil prices to fall back from current levels. The situation in Saudi Arabia is increasingly concerning and the longer the East-West pipeline remains closed, the higher oil prices will move near-term.
Technical Views
Crude
The rally in crude has seen price breaking out above the July highs and the 95.06 level with price now testing the 104.26 level. We’ve seen some initial resistance here but while price holds above the 95.06 level, the bias remains skewed towards further upside and a test of the 108.73 level next.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.