I think that there would be plenty of buyers on short-term dips, and it would not surprise me at all to see this market reach the $120 level during the month.
The West Texas Intermediate Crude Oil market has been bullish for some time, but that does not necessarily mean that it has gone straight up in the air. The market has seen a couple of dips as of late, but when you zoom out, you can see that we are in a bit of an up-trending channel. The $100 level sits under current trading, and of course, is an area that will attract a lot of attention. I suspect that the $100 level will lead the way for the month of July.
If the market were to drop below the $100 level, it could lead to further selling. At that point, the market is likely to see an attempt to get down to the $90 level, an area that has been important in the past. If we were to break down below the $100 level, it’s likely that we would see further selling, due to perhaps some demand destruction. After all, there are a lot of concerns when it comes to the global market slowing down, as economies will more likely than not enter some type of recession. It’s also worth noting that recently we had seen demand numbers drop in the United States, but at the same time, the Strategic Petroleum Reserve is at its lowest level since 1986.
More likely than not, I think that there would be plenty of buyers on short-term dips, and it would not surprise me at all to see this market reach the $120 level during the month. Breaking above there is a very bullish sign, allowing the market to go to fresh, new highs, perhaps attacking the $130 level. Ultimately, that is my base case scenario, especially as some of the bigger producers in the Middle East claim that they are already producing at full tilt.
However, if we do see economies start to crash, oil will suffer as a result. After all, less demand for crude oil would be much lower. Also, you need to keep an eye on that $100 level, because as things stand right now, crude oil is the last of the commodities to continue holding on to a very bullish attitude. We have seen copper crash, natural gas lose 1/3 of its value, industrial metals get hammered, and of course lumber as well.