Headlines Keep Pressuring Oil Higher


News events keep pushing oil higher.

Last month, Iranian sanctions were the story. Now traders are focusing on a disruption in Norway as oil workers go on strike. Libyan supplies are also being kept off the market as civil war halves the country’s crude production.

Market watchers are focused on other potential catalysts they think could keep prices rising. Within the last week, Bank of America Merrill Lynch said the Iranian tensions could drive oil to $120 from its current price range in the $70s. Other strategists see risk of an even bigger spike if Tehran closes the Straight of Hormuz at the entrance of the Persian Gulf.

While these events are short-term catalysts, experts say two broader factors lay the groundwork for a potential surge in prices. First is a general lack of extra capacity in the world, exacerbated recently by political collapse in Venezuela and under-investment in Mexico. (This caused Bernstein to lift its target to $150 on Friday.)

The second major catalyst is a strong global economy. Most readers likely know about last week’s better-than-expected non-farm payrolls report. A sentiment report and unemployment numbers from Europe in the last week have also held up better than feared amid tariff squabbles with the U.S.

Near-term events that could also impact prices include the American Petroleum Institute’s inventory report at 4:30 p.m. ET today. The Energy Department’s more-influential numbers follow at 10:30 a.m. ET.

The uncertainty overseas seems to have shifted momentum to Brent Crude (BZU18) over U.S. WTI oil (@CL) recently. Brent’s up 2.4 percent in the last week while @CL has risen about half a percent. That kind of price differential often lifts refinery stocks. The group’s outperformed the broader energy sector by a wide margin. Within the S&P 500, HollyFronteir (HFC) and Valero Energy (VLO) have fared best over the last year.

Valero Energy (VLO) with 100-day moving average.
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David Russell is Global Head of Market Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.