We got what was expected from OPEC+ in terms of a 411, 000 b/d increase for July. The main impetus behind the price rise is Ukraine launching a major attack on Russia, which raises geopolitical risk and uncertainty around energy supply, possible sanctions, and so on. Secondly, over the weekend, Iran stated that it received a letter from the U.S. outlining what Washington believes a nuclear agreement could look like. Iran’s response, via an interview on RT, was that the U.S. is “out of touch with reality.” That’s another diplomatic breakdown and a signal that we’re not close to a deal. From a trading perspective, WTI is hovering around $62.50. If it stays below $64, I’m comfortable remaining short. But if we break through $65, then shorts will start to panic and we could go to $70, and then possibly even higher. If we drop below $55, we’re headed down the drain.
What’s demand telling us about the oil price outlook?
What drives all markets, including oil, is sentiment, not fundamentals. Look at what happened on April 2nd. Oil prices took a nosedive because sentiment turned extremely negative; the market was expecting a small global economic hiccup and instead got a full-blown scare from Trump’s tariff announcement. WTI fell from $72 to $55 in a straight line within 6 days, but supply and demand had not changed. Since then, we’ve been moving sideways as the market can’t decide whether to go back to the highs or revisit the lows. Longer term, I think the market is headed significantly higher because there’s no alternative to printing money. All this talk about the US growing out of debt is nonsense; it needs to sell treasury bonds, refinance, and raise epic amounts of cash - over $9 trillion, plus a $2 trillion deficit. That means the market is eventually going to go much higher - the only question is, from which price point.