Oil Price: Where does the price go from here?

[dan_s]

Watch the CME market summary at this link: http://www.cmegroup.com/trading/energy/ ... crude.html

Try to watch their brief (~3 minute) summary on the crude oil markets each day after the markets close. Over time it will give you a better idea of how the "speculative traders" think.

The NYMEX contracts for WTI for May and June both closed over a key resistance point today at $66.66. If WTI closes over $67.00 on Friday, it sets the stage for a move to $75.00/bbl. The analysts at CME have been talking about the takeout of this key resistance level and its significance for over two months.

Goldman Sachs has been saying for over two months that they believe Brent would finish the year around $82.00/bbl, which would put WTI over $75.00. The gap between Brent and WTI has widened because Europe is more concerned about the pending military attack on Syria. Europe is more dependent on imports from the Middle East / North Africa than we are. The wide gap between Brent and WTI will increase U.S. oil exports to Europe and Asia.

FEARs like the recent "Tariff War" between the U.S. & China and what's happening in Syria tend to be overblown. I personally think the missile attack on Saudi Arabia today was a bigger deal. That attack was bought and paid for by Iran. Saudi Arabia hates Iran and vis/versa. Trump wants to rip up the Obama "Iranian Nuke Deal". Everything lines up now for him to do just that and Saudi Arabia and their friends in OPEC will encourage Trump to do it; so will Israel. New sanctions against Iran will send oil prices a lot higher.

IEA's next "Oil Market Report" should confirm how tight the global oil market has become. The "glut" is gone as U.S. and OECD crude oil and refined product inventories are now at or below the 5-year average for this time of year. Plus, May is the beginning of the annual spike in demand for oil. Last year, demand for oil increased by 2.3 million barrels PER DAY from Q1 to Q2. I am expecting demand to go up by at least that much this year. BTW demand for oil has increased by over a million barrels per day for 8 straight years and that trend will continue to 2030.

This oil price cycle is just like all of the others before it (although much longer). The "bust" has set up the next "boom".

Q1 results for our upstream companies are going to be very good and the stock prices are not even close to where they should be if WTI stays close to current levels. Remember, my valuations are all based on $60/bbl WTI.

The "Wall Street Gang" is a herd that can change directions very quickly and the "warm-up" to the energy sector has started.