Brent crude advanced 1.31% to settle at $108.70 per barrel on Monday, while West Texas Intermediate gained 1.26% to close at $95.33. 

The rally came as Houthi militants intensified drone and missile strikes against Saudi Arabian energy infrastructure over the weekend, reigniting supply disruption fears that had eased modestly through late September.

Orminda evaluates the geopolitical forces lifting crude prices and the technical outlook for both benchmarks. It also considers whether macroeconomic headwinds from higher inflation could ultimately cap the rally.

Geopolitical Supply Risks Return to the Foreground

Houthi strikes targeted Saudi oil processing and export terminals over the weekend, marking the most significant escalation in attacks since the conflict’s earlier phase. 

While Saudi Aramco confirmed that production was not materially disrupted, the proximity of the strikes to critical export infrastructure elevated the risk premium embedded in crude prices across both Brent and WTI contracts.

The attacks arrive at a time when OPEC+ production cuts have already tightened the global supply balance. 

The alliance’s decision to extend voluntary output reductions through the end of 2026 has narrowed spare capacity to an estimated 2.5 million barrels per day, leaving minimal buffer against unexpected outages and making the market acutely sensitive to any hint of supply disruption.

Shipping insurers responded by raising war-risk premiums for vessels transiting the Red Sea corridor, adding logistical costs that feed through to delivered crude prices. 

Average freight rates for tankers on the key Middle East-to-Europe route have climbed roughly 18% over the past month, reflecting the increased cost of insuring cargoes through contested waters.

The latest weekly EIA report showed US gasoline inventories declining by 1.8 million barrels, while distillate stocks also fell. 

Domestic demand indicators remain relatively firm heading into the fourth quarter, though refinery utilisation rates have slipped as seasonal maintenance programmes begin across the Gulf Coast.

Inflation Creates a Counterweight

Monday’s advance in crude occurred despite a broader risk-off tone driven by September’s CPI report. Headline inflation printed at 3.7% year-over-year versus 3.6% expected, and the data pushed the 10-year Treasury yield to 5.27%. 

Higher rates typically weigh on commodity prices by strengthening the dollar and threatening to dampen economic activity over time.

The tension between geopolitical supply risk and macroeconomic demand concerns creates a tug-of-war for crude. 

A further acceleration in inflation, partially driven by elevated energy costs, could force the Federal Reserve into additional tightening that ultimately softens fuel consumption, creating a self-correcting dynamic that caps the upside for oil prices.

China’s latest economic data added another layer of uncertainty. September industrial output growth decelerated to 4.8%, below expectations, and crude oil imports fell 3.2% year-over-year. 

As the world’s largest crude importer, any sustained slowdown in Chinese demand would weigh on the global supply-demand balance and challenge the geopolitical risk premium.

Technical Picture and Key Levels

Brent’s move above $108 places the front-month contract within range of the $110.50 resistance level, which capped the September rally. A sustained break above that area could trigger momentum-driven buying toward the $115 zone, last visited in July when Middle East tensions were at their prior peak.

Support rests at $105.80, the 20-day moving average, followed by the $102 zone, which has held on multiple tests since August and marks the lower boundary of the current trading range. A break below $102 would signal a shift in the supply-demand assessment and could accelerate selling toward the $98 area.

The 14-day RSI reads 58 on Brent, in bullish territory but well short of the overbought threshold at 70, suggesting room for further upside before the contract enters technically extended territory. WTI’s technical picture mirrors Brent, with resistance at $97 and support at $93. The MACD remains in positive territory on both contracts, reinforcing the near-term bullish bias.

Open interest in Brent futures has climbed 6% over the past two weeks, indicating that fresh capital is entering the market rather than short positions being closed. 

The increase in speculative length suggests that money managers are positioning for a further supply-driven rally, though the pace of accumulation has moderated compared to the aggressive buying seen in early September.

Crude oil’s advance reflects a market pricing geopolitical supply risk ahead of macroeconomic demand concerns. 

Whether Brent can sustain levels above $108 will depend on the interplay between Middle East security developments and the Federal Reserve’s response to sticky inflation, with $105.80 and $110.50 framing the near-term range.