The Brent oil price has busted through it’s post-slump top at $62.88 as I write up 5%. The cause is the market’s growing confidence in the shale oil production peak as the DOE weekly inventory build dropped sharply:
Adding fuel to the fire, the US dollar was hit hard on weak data, offering a monetary tailwind.
So, where to now? Up, evidently, as shorts get blasted out of the market! But that’s technical and won’t take long. I do not expect the oil price to keep rising. If we can reach $70 then the declines in US shale rigs will reverse and oil begin to expand once more. There’s a huge contango play on as well in oil storage that is going to release supply as prices rise. Then, longer term, there is Iran. I still expect longer term oil to float in the $60 range.
