Crude Oil Bounces Off Key Technical Level with Attacks on Saudi Airports

WTI Crude (/CL) is advancing this morning as Middle East tensions come back into focus.

Yemen’s Iran-aligned Houthis struck both King Khalid International Airport in the Saudi capital of Riyadh and Abha International Airport in Abha, Saudi Arabia, disrupting flights Thursday, according to Reuters.

Axios reported that the Pentagon had instructed U.S. Central Command to complete preparations for a possible resumption of major combat operations in Iran. On top of that, Ukraine reports that it struck an oil refinery and a petrochemical complex in Russia overnight, and attacks on vessels in the Strait of Hormuz and near the Yemeni coast have increased significantly over the last week, according to United Kingdom Maritime Trade Operations (UKMTO).

The fundamental reasons for crude's move higher overnight are clear, but WTI is also holding key technical structure.

WTI, the U.S. oil benchmark, has been trading in a bullish ascending channel since the July 2nd lows, when the memorandum of understanding (MOU) between the U.S. and Iran broke down and strikes ramped back up. The trading channel has established a well-defined support level, with crude continuing to make higher lows since July, holding the 200-day simple moving average (SMA), and recapturing the 50-day SMA at the beginning of August. WTI briefly traded above $100 for six consecutive sessions in mid-September before breaking lower on reports of additional U.S. measures to reduce energy prices, including a potential diesel export ban.

Over the last several days, crude has consolidated at three levels: the 50-day SMA, the lower support line of the ascending channel, and the Anchored Volume Weighted Average Price (AVWAP) from the beginning of February. AVWAP calculates the average price from a specific starting point, giving more weight to prices traded on higher volume than to those traded on lower volume. All three indicators have converged in the $87 to $89 range, which acted as key support between March and June of this year.

The next area of resistance is the 20-day SMA at $94.26. If price can overcome that level, the upper line of the channel, north of $110, could come into play. The daily Moving Average Convergence Divergence (MACD) is also beginning to curl higher, signaling that near-term momentum is shifting from bearish to bullish.

News aligning with key technical levels may be coincidental, but oil's technical structure remains intact, at least for now. A move higher could put additional pressure on global bond yields and force central banks to consider further tightening which could bleed over into the equity market.

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