Oil Soars As Middle East Conflict Escalates
Crude Higher on Thursday
Cude prices remain elevated today as tensions continue to build in the Middle East and attacks intensify. Crude futures are now back above the $95.06 level for the first time since early June and brent crude is back up to $100 p/b. The US declared that it had destroyed five of Iran’s tankers in retaliation for Iran targeting US navy ships with ballistic missiles. Iran has shifted gear recently, moving into a more offensive position rather than simply responding to US attacks and Tehran has warned that it is ready for a longer war. There have been several other key attacks in recent days including those by Houthi rebels against energy infrastructure in Saudi Arabia. With the violence in the Middle East heating up again, crude prices loom poised to continue higher near-term with little to suggest the chance of a correction lower unless we see shock news of a fresh ceasefire.
HSBC Raises Price Forecasts
In a note issued this week, HSBC has raised its longer-term oil price forecast citing the ongoing disruption caused by the conflict, particularly the closure of the Strait of Hormuz. The bank also foresees a longer return to market equilibrium and no longer think the market will return to pre-conflict levels but will establish a ‘new normal.’ This echoes what we’ve been hearing recently from other banks and suggests that higher oil prices are here to stay over the next 24 months.
Technical Views
Crude
The rally in crude has seen price breaking out above the 95.06 level and with momentum studies bullish, focus is on a continuation higher here with 104.26 the next bull target. If we break back below 95.06 near-term, focus will shift back to 84.60 as the next support zone to monitor.
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