Is the Storm Over?
After sharp volatility early in the week, U.S. crude has been trading sideways. It’s been an action-packed week. Crude soared 12.8% on Monday, the largest one-day gain of the year. Crude hit a high of $63.37, its highest level since mid-April. However, WTI/USD coughed up 5.0% of these gains on Tuesday and then settled down. Although the volatility has resided, tensions have increased between the U.S. and Iran, with threats of further hostility weighing on risk sentiment.
$100 Barrel – A Bridge too Far
What’s next for oil prices? With crude soaring on Monday, some analysts have made headlines predicting prices of $100 a barrel. I do not share this view, barring a major armed conflict breaking out between Iran and the U.S. or its Gulf allies. The $100 level has proved to be a resilient level, having held firm since June 2014. At the same time, this week’s attack on a Saudi oil refinery points to the vulnerability of oil production facilities and has left investors nervous. The 70.00-level could be reached if there are further negative developments in the Persian Gulf, which is a distinct possibility. In the coming days, I would expect crude to remain close to the $60 level, possibly pushing past this line, but still remaining close by.