The price of crude oil is set for the largest weekly gains since early April as troubles in the Middle East continued. Late last week, Saudi Arabia and the United Arab Emirates (UAE) reported that a number of their oil tankers had been attacked. This attack was blamed to Iran supported Yemeni rebels.
Yesterday, Saudi Arabia responded to the attacks by having airstrikes in Houthi regions of Yemeni. This means that the crisis in the region will likely continue. If it does, investors believe that the oil supply chains could be affected, which will affect the prices.
As these challenges go on, there are talks in Washington that the US could be in confrontation with Iran. In recent days, Trump has been in confrontation with his senior leaders on how to deal with the country. His senior leaders seem to support going to war with Iran, a decision the president is not comfortable with. He has signalled that he would want to speak to the Iranians as tensions rise in the Gulf. While these discussions are unlikely to happen, the president believes that another foreign war would be devastating to him politically. Most importantly, the president appears to be disappointed with John Bolton, a hawkish advisor who seems to favor intervention policies.
The genesis of these tensions is the Trump withdrawal from the Iran nuclear deal, a decision that his previous advisors like H.R McMaster rejected. After the withdrawal, the president implemented large sanctions on the country. These sanctions escalated a few weeks ago when the administration rejected the idea of extending the waivers given to eight other countries.
The West Texas Intermediate (WTI) has risen from a low of $60 and reached to a high of $63.7. On the chart below, the price is along the 21-day moving averages and above the 42-day moving averages. The RSI has diverged by declining from a high of 83 and has moved to a low of 50, which is viewed as neutral. Today, the price will move depending on the news from the gulf regions.