The big winner here will be the United States, with its almost 14 million barrels of production daily.
Light Sweet Crude Oil
The Light Sweet Crude Oil market had initially fallen during the open on Wednesday, but you can see that we've seen a lot of sideways action over the last couple of weeks. At this point, I also recognize that there are a lot of concerns out there and I do think that it is worth watching the fact that a gas refinery has been hit in Iran and now the Iranians are looking to strike other energy aspects.
So really what's going on here at the end of the day is that the only country that's going to win in this argument will be the Americans because US oil is at an all-time production. In fact, the United States is the world's largest producer of crude oil, although it is a light sweet crude variant. There is also Albertan heavy crude and Venezuelan heavy crude that now comes into the picture.
Bombing Oil Assets
With the Middle East busy bombing each other's desalination plants and refineries as well as oil fields, this leads to the world looking to North America for energy. This is going to drive up the price of oil, but you should also keep in mind that some of the big players in this conflict actually come out ahead if that were to happen. Therefore, I do not think that the oil markets are about to calm down anytime soon as the Iranians will be looking to strike back, and of course it looks like the situation is only getting worse as far as damaging each other's energy supply.
The Light Sweet Crude market will be paying close attention to the $100 level and this could, as a byproduct, force the Federal Reserve to become a little bit more hawkish than once thought. That might be why we're seeing the US dollar pick up strength during the day as well as a safety bid. I think there is plenty of support for crude that anytime it drops with any significance, you have to think maybe of waiting for a bounce to start buying it.
Unfortunately, it's difficult to predict when these things occur because they're based on random headlines. Nobody really knows when a missile is going to hit a fuel depot or a desalination plant or whatever. The only thing as a trader that you can do is either not get involved or keep your position size smaller than usual and look at the chart. You can see the direction that the overall momentum has been in; there's no need to fight it.