The West Texas Intermediate Crude Oil market initially fell on Monday but then turned around to capture a little bit of upward momentum. A lot of crosswinds going on around the crude oil markets right now, as the whole Russia/Ukraine tension situation causes a little bit of bullish pressure, but this is a market that was very bullish to begin with. It is a bit difficult to imagine a scenario in which you can convince me to short this market, and that was true two weeks ago.
Having said that, it looks as if we will continue to see upward pressure, but a pullback would not necessarily be the worst thing ever. The $85 level would be an area where I would expect to see a certain amount of support, as it is a large, round, psychologically significant figure, and an area that has been important previously. Furthermore, we also have the $82.50 level which has been support in the past, and it should send markets higher as well. This is a market that has so much pressure underneath it that I think it is almost impossible to come up with a bearish thesis, at least at the moment.
As long as we continue to see OPEC struggling to fulfill quotas, I think you going to continue to see oil rise. Furthermore, the reopening trade has caused a massive amount of demand as well, and that is making this a very difficult market to satisfy. I do think that ultimately, we will go looking towards the $90 level in the short term, but I think you can count on a lot of noisy behavior in the short term as OPEC has a meeting this week.
The play here is going to be look for bits and pieces of value as we go along, so buying the dip is going to continue to be my favorite way to play this market. As long as we can stay above the $80 level, I think that there will be plenty of people out there willing to pick this market up whenever they get the opportunity. I expect $90 to be a little bit of a barrier, but longer term I think it will be but a blip on the radar.
