Oil is trading up today and is very close to recent highs. We haven’t seen oil close above the 80 level since 2014.
The momentum is strong and we remain trading in the trend channel that started last year. Watch the 80 level carefully. Should we close above the resistance level, a quick squeeze move to 88/90 looks probable.
Last week Bloomberg wrote a piece on a possible oil spike referring to research from Sanford C. Bernstein & Co.
“Investors who had egged on management teams to reign in capex and return cash will lament the underinvestment in the industry,” the analysts wrote. “Any shortfall in supply will result in a super-spike in prices, potentially much larger than the $150 a barrel spike witnessed in 2008.”
Neil Cunningham writes U.S. Sanctions Could Add $50 To Oil Prices. Via Oilprice.com:
In other words, if Saudi Arabia is unable to plug the deficit, the U.S. would likely have to back down on its “zero tolerance” policy towards Iran. The oil market is too tight, and the supply gap would be too large. Cutting Iran exports by that much, in an increasingly tight oil market, would send prices skyrocketing, something that the Trump administration probably won’t be able to stomach. If Trump proceeded, a price spike of that magnitude would lead to a meltdown in demand.
XOP, oil and gas ETF, has traded up over past days and we are looking for a strong open today again. 45 is a huge level.
Should we close above the 45 resistance, things could get rather fluid to the upside.
Source: charts by Bloomberg