Crude Prices Settle Below $60 Level
Investors were treated to a roller-coaster ride last week, as crude prices jumped 12.8% on Monday, only to retract by 5.0% the next day. This was a direct reaction to an attack on a Saudi oil refinery, which reduced Saudi oil production by some 50%. Oil prices soared as high as 63.37, but quickly fell back below the 60.00 level. The spike in crude highlights the vulnerability of oil facilities in the Middle East, and investors remain wary as tensions remain high between Iran on the one hand, and the U.S. and its allies on the other. Any negative developments, such as additional attacks on oil installations, could quickly cause investor panic and send oil prices soaring once again.
At the same time, the headlines predicting that crude will hit $100 seem somewhat exaggerated, in my view, unless there a major armed conflict breaks out in the Persian Gulf. Traders should keep in mind that the 100 level has proved to be quite resilient, having held firm since June 2014.