Brent crude is trading near $110 per barrel right now, its highest level in five months. What's behind the rally? The worsening situation in the Middle East that has investors seriously worried about the stability of the global oil supply. And the trend looks set to keep climbing over the next month.
Let's start with the biggest driver. The recent wave of attacks on Riyadh's facilities is a major contributing factor. Why does this matter so much? With hostilities heating up, Saudi Aramco has ordered its Dhahran headquarters staff to evacuate—a clear sign of how seriously the company is taking the threat. Then there is the risk of shipping through the Strait of Hormuz and the Bab el-Mandeb, both of which are vital energy routes. If the conflict escalates, the geopolitical premium baked into oil prices could climb even higher. All in all, it is the regional picture that is doing most of the heavy lifting here.
US inventory data is lending a hand, too. The latest Energy Information Administration (EIA) report showed commercial crude stocks down 3.06 million barrels, bringing the total to 412.5 million barrels for the week ending October 16. Such a drawdown tells us that the market is still tight, and it is helping to keep prices up. Simply put, depleted inventories mean less of a cushion against any supply shock.
On the technical front, oil has pushed right up against resistance near $110. A clean break and a sustained hold above this level could open the door to more upside ahead, with $120 per barrel serving as the next target. In other words, the setup looks constructive for bulls.
The ultimate recommendation is to buy Brent crude at the current price ($109.30), aiming to reach $120.00 within one month. To keep risk in check if the market plays against us, place a Stop Loss order at $105.00.
This content is for informational purposes only and is not intended to be investing advice.
