(Bloomberg) — Oil gained, trading at a five-month high, with technical resistance tempering a rally sparked by supply risks from a flareup in Middle East fighting.

Brent traded above $110 a barrel after jumping almost 4% on Friday when traders positioned for the risk of weekend escalations in the Iran war. Prices pushed higher this session after Iran said it has “no choice” but to assert control over the Strait of Hormuz, while US lawmakers continue to resist President Donald Trump’s diesel export deal with Russia.

Several technical factors have kept the rally contained. Friday’s leg higher sent prices into overbought territory on the 9-day Relative Strength Index, which typically signals that oil is due for a pullback. Trend-following commodity trading advisers are sitting at 100% maximum long in both Brent and WTI, suggesting they’ve exhausted buying capacity for now, according to Kpler.

Escalating tensions in the Middle East come as physical markets show signs of loosening, with Hormuz flows holding up despite mounting threats. The Dated Brent benchmark, which underpins prices in Europe, traded near $117 on Monday, down almost $16 from a week prior. US Energy Secretary Chris Wright told Fox News that Gulf oil flows had recovered to about 80% of their pre-conflict level, although refined-product shipments remain constrained. 

“Friday’s sharp move lower in dated Brent, even as the paper market rallied, highlights just how many crosscurrents traders are trying to navigate,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Group. “More vessels are heading to China, flows continue through Hormuz despite escalating attacks, and Russia-Ukraine headlines are adding another layer of uncertainty.”

Global benchmark Brent has surged more than 75% this year as fresh hostilities in the Russia-Ukraine war and the Middle East pose threats to supply flows. Refined products such as diesel have rallied even harder, with European futures for the commodity up more than twofold this year.


Saudi Arabia has postponed its flagship conference to next year following continuing attacks by the Houthis, in a significant blow to the kingdom’s ambitions of positioning itself as a hub for business. Mona Yacoubian, Director and Senior Adviser, Middle East Program at the Center for Strategic and International Studies, breaks down the latest from the Middle East. Source: Bloomberg

Over the weekend, a Saudi helicopter crashed near the border with Yemen and Houthi rebels targeted Yanbu, a crucial export hub, while UK maritime operations said two tankers reported being hit in the Gulf.

Still, Iraq — which has suffered more than some of its neighbors from the disruption because it lacks its own vessels — has exported more than 3.4 million barrels a day of crude so far this month, according to the country’s oil minister, bringing it close to levels seen before the Iran war. 

The actual number of vessels going in and out of Hormuz and parts of the Red Sea is hard to track, as ships often switch off their satellite signals making it more difficult to count cargoes.

Brent is caught between heightened geopolitical risk and signs of increasing flows from the Middle East, according to June Goh, a senior oil market analyst at Sparta Commodities SA. “The markets seem unwilling to absorb the higher prices with the rest of the economy not looking rosy,” she said, adding that Brent is likely to remain rangebound around $100 a barrel.

Diesel outlook

Meanwhile, US President Donald Trump said the US cut a diesel export deal with Russia. These efforts have been widely rebuked by US lawmakers, who introduced a bill to block the fuel purchases. Some experts say any diesel release by Moscow would offer limited to no price relief, with the revenue helping finance Russia’s war in Ukraine.

The represents another roadblock to the administration’s efforts to tamp down soaring costs of refined products like gasoline and diesel, a source of voter ire ahead of midterm elections next month. The US leader also waived levies on the Russia’s energy shipments to preserve the Kremlin’s peace talks with Ukraine, which has been pummeling Moscow’s refining infrastructure in another boon to prices.

In a push to end the four-year conflict, Russian President Vladimir Putin proposed talks with Trump and Chinese leader Xi Jinping next month, the Wall Street Journal reported. While Moscow confirmed discussions were taking place, a senior US official said Trump hadn’t agreed to such a summit, the newspaper said. 

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