Why is oil surging again?
The key reason is that the Houthis keep causing trouble. They’re targeting Saudi energy infrastructure, wreaking havoc at Aramco facilities in Yanbu, the Shaybah oil field, and Riyadh airport, and making crude oil exports a problem.
Another factor is the attacks on merchant ships in the Strait of Hormuz. Tankers have been hit by mines, making passage through the strait risky. If they avoid the strait and take a detour, costs will multiply many times over.
Just think about the risk premium in oil prices: it simply isn’t going away.
We previously had a short-selling view around $99:
1. Although the price has now moved above my entry point, reaching $100.64, the short position is showing a floating loss. The price is hugging the upper Bollinger Band, and upward momentum looks strong, so it could continue climbing.
2. But high oil prices are bound to collapse under their own weight. If tensions in the Middle East ease and shipping returns to normal, the risk premium will unwind very, very quickly. Oil could fall 10% in a one-way move, to $90 a barrel.
Oil’s self-collapse is inevitable. Hold on to those short positions—there’ll be plenty of opportunities.
The key reason is that the Houthis keep causing trouble. They’re targeting Saudi energy infrastructure, wreaking havoc at Aramco facilities in Yanbu, the Shaybah oil field, and Riyadh airport, and making crude oil exports a problem.
Another factor is the attacks on merchant ships in the Strait of Hormuz. Tankers have been hit by mines, making passage through the strait risky. If they avoid the strait and take a detour, costs will multiply many times over.
Just think about the risk premium in oil prices: it simply isn’t going away.
We previously had a short-selling view around $99:
1. Although the price has now moved above my entry point, reaching $100.64, the short position is showing a floating loss. The price is hugging the upper Bollinger Band, and upward momentum looks strong, so it could continue climbing.
2. But high oil prices are bound to collapse under their own weight. If tensions in the Middle East ease and shipping returns to normal, the risk premium will unwind very, very quickly. Oil could fall 10% in a one-way move, to $90 a barrel.
Oil’s self-collapse is inevitable. Hold on to those short positions—there’ll be plenty of opportunities.