Just as quickly as they appeared, oil bears are on the run.
Crude oil futures (@CL) closed at their highest level yesterday since July 10, bolstered by a series of positive headlines:
- Weekly inventories fell by 2.6 million barrels, more than twice the expected drop. (That’s bullish because less oil in storage means less supply, and that means higher prices.)
- Gasoline stockpiles fell by 1.6 million barrels, while forecasters had expected a slight build. This was viewed as an indication of strong demand.
- Fatih Birol, head of the International Energy Agency, told reporters in India that markets could tighten — especially as Venezuelan production continues to fall. (By the way, did you know Brazil just sent troops to the border and Peru declared a health emergency because all the people fleeing the once-rich South American nation?)
Speaking of geopolitical turmoil, there are other potential geopolitical risks as violence returns to Libya and Iran shows no sign of backing down in its sanctions showdown with the U.S.
Those situations also have the potential to withhold crude from the market at the very same time the U.S. economy is accelerating and Europe is recovering. It would suggest the short-term bearish move accurately predicted by Market Insights earlier this month has run its course.
In conclusion, this isn’t a trade recommendation and everyone needs to do their own homework, but sentiment seems to be turning more positive in oil once again.