The light sweet crude oil market has been all over the place during the month of May as we continue to see a lot of noisy behavior.
Ultimately, the $100 level seems to be an area that traders can agree on, and in the environment that we find ourselves in, I think it's going to be difficult to expect the oil market to get away from that general attitude.
While we have seen some progress in the way of less shooting, the reality is that most traders are watching headlines coming out of the Middle East to try to determine whether or not we get any clarity. I don't think we're going to because, quite frankly, even though the Americans and the Iranians are not shooting at each other anymore, now they're basically talking about talking.
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Geopolitical Tensions and Supply Chain Risks
The big breakthrough might be a framework to talk over the next 60 days. I think that continues to keep the entire situation tense, and even if oil does get through the Strait of Hormuz, it is only a matter of time before the supply chain breaking shows up at storage facilities. In fact, there's several countries in Asia that are already starting to struggle.
While the light sweet crude oil market isn't necessarily directly involved in that, the reality is that Asian countries will have to come into the United States to buy crude oil. In this environment, they'll have to buy it from pretty much anywhere they can, for that matter.
The $85 level looks to be rather supportive, and if we were to break down below there, it could be the end of the massive jump, and we could see oil drop towards the $70 level. I'm not necessarily counting on that, but it is a scenario that we need to keep in the back of our mind.
I would not be surprised at all to see the market turn around and bounce towards the $100 a barrel level again as we just chop back and forth. Over the last couple of months, I don't know that anything's going to change for June.
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