Energy Prospectus

WTI closed at $72.29. It traded briefly over $73.00 which was a new 3+ year inter-day high.
A bullish EIA storage report and increasing "unplanned supply outages" combined to show how tight the global oil market really is: Canada, Venezuela, Libya and soon to come Iran.

Stage 4 of the "Rebound Phase" has Strong Support at $67.06 and Strong Resistance at $74.82. Several closes above $72.50 should set the stage for a test of the upper limit.

With U.S. refineries operating at near maximum utilization, we are going to see week-after-week of crude oil inventory draws. U.S. production growth has flattened.

Brent was also up today (closing at $77.40) , but not as much as WTI. The gap between the two benchmarks has closed to $5.10/bbl. I think the FEAR of WTI going $15/bbl cheaper than Brent might be somewhat over-blown. Part of the fear was because crude oil at Cushing was expected to build rapidly and, so far there is no sign of that happening. There are lots of very smart people that manage the inventories at Cushing. Backwardation of the NYMEX strip also keeps speculators from holding physical barrels at Cushing.

I know it seems counter-intuitive, but backwardation of the NYMEX strip is actually a bullish indicator during the rebound phase.

WTI is now 63% higher than it was a year ago. Plus, natural gas and NGL prices are better. Yet only seven of our Sweet 16 companies are trading in the upper quarter of their 52-week range. I am seeing signs the Wall Street Gang is finally starting to "get it". Strong Q2 results should get the herd to change direction. In previous rebounds, Q3 was the best quarter because the summer months are the highest demand period. In 2010, the Sweet 16 gained over 50% in Q3 and Q4.

Barron's after the markets closed: "Oil was one area that did well today, reaching its highest level in three years as investors worried about supply threats. But what about that production increase from OPEC? TS Lombard's Konstantinos Venetis writes that even with "100% compliance," that boost won't be "nearly enough to drag the market down. Absent a global growth scare, oil prices remain well supported and biased to the upside."

That said, he also expects more volatility in the commodity price going forward. That could be said for stocks too, as the tariff talk continues. “There really hasn’t been any major asset class or any part of the world Trump hasn’t spoken out against in recent weeks," says deVere Group's Nigel Green. "Vigilance is crucial. Now is the time for investors to ensure that their portfolios are properly diversified."

To quote Samuel L. Jackson in Jurassic Park, "Hold on to your butts."

The Hot Stock

Concho Resources (CXO) shot to the top of the S&P 500, helped by the aforementioned jump in oil prices.

Concho gained $6.09, or 4.6%, to $137.78.

Concho wasn't alone in celebrating crude's climb; Apache (APA), EOG Resources (EOG), and Pioneer Natural Resources (PXD) were also among the five best performing stocks in the index. And if Lombard's Venetis is correct, these stocks may see more gains with oil's rise.