U.S. West Texas Intermediate and international benchmark Brent crude oil futures are on track for their first weekly gains this month, while moving into a position to challenge their highs for the year. Fears of supply disruptions, fueled by rising tensions in the Middle East, are the catalysts behind the strong gains.
The bullish theme this week is being driven by worries about supply. Early in the week, prices rose after attacks on Saudi Arabian operations, but those gains were wiped out by renewed concerns over U.S.-China trade relations. However, as the week wore on, crude oil traders put less emphasis on this issue and shifted their focus on potential supply disruptions due to heightened concerns over possible military activity in the Middle East.
Throughout the week, buyers slowly clawed back earlier losses as the headlines continued to indicate tensions were brewing between Iran, the United States and Saudi Arabia. A few isolated incidences drove the price action during the week, but collectively, they pointed toward a potential military conflict in the region. These events include:
Escalation of Middle East Military Activity
According to CNBC, “A Saudi-led military coalition in Yemen carried out several air strikes on the Houthi-held capital Sanaa on Thursday after the Iranian-aligned movement claimed responsibility for drone attacks on two Saudi oil pumping stations earlier in the week.”
U.S. Middle East Activity This Week