Oil Price Fundamental Daily Forecast – Prices Supported after Saudi Arabia Suspends Shipments through Red Sea Lane

U.S. West Texas Intermediate and international-benchmark Brent crude oil are trading mixed early Thursday after finishing higher the previous session. The markets are being supported by the news that Saudi Arabia suspended crude shipments through a strategic Red Sea shipping lane. On Wednesday, prices were supported by a friendly U.S. government report.

At  0849 GMT, September WTI crude oil is trading $69.13, down $0.17 or -0.24% and September Brent crude oil is at $74.26, up $0.33 or +0.43%.

According to reports, Saudi Arabia, the world’s biggest oil exporter, said on Thursday that it was “temporarily halting” all oil shipments through the strategic Red Sea lane of Bab al-Mandeb after an attack on two big oil tankers by Yemen’s Iran-aligned Houthi movement.

Saudi Energy Minister Khalid al-Falih said in a statement that the Houthis had attacked two Saudi Very Large Crude Carriers in the Red Sea on Wednesday morning, one of which sustained minimal damage.

“Saudi Arabia is temporarily halting all oil shipments through Bab al-Mandeb Strait immediately until the situation become clearer and the maritime transit Bab al-Mandeb is safe,” the minister said.

In other news, prices were supported on Wednesday after official U.S. data showed U.S. crude oil inventories last week declined more than expected to their lowest level since 2015 as exports climbed and stocks at the Cushing futures hub dropped.

Crude inventories fell 6.1 million barrels in the week-ending July 20, versus analyst expectations for a decrease of 2.3 million barrels, the U.S. Energy Information Administration said on Wednesday.

At 404.9 million barrels, inventories, not including the nation’s emergency petroleum reserve, were at their lowest level since February 2015.

Forecast

The announcement this morning that the Saudis have closed some shipping lanes in the Gulf because of rebel Houthi attacks could become a bullish deal today because it is actually affecting supply. It’s not a speculative event.

Additionally, most exports from the Gulf that transit the Suez Canal and the SUMED Pipeline also pass through Bab al-Mandeb strait.

Also from the EIA, an estimated 4.8 million barrels per day of crude oil and refined petroleum products flowed through this waterway in 2016 toward Europe, the United States and Asia.

Looking at the daily chart, the key area to overcome for the bullish WTI traders is $69.64 to $70.42.