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The recent rally in oil has been a tough one to chance, even for the bulls. Yes, there’s lots to like about medium-term oil prices but omicron is cutting demand — particularly in aviation — and China is locking entire cities down.
Yet here we are near seven-year highs after six straight weeks of gains in oil, most of that in the worst period for global equities in the past year. The trend is continuing today with WTI up $1.19 to $88.01.
I’m sympathetic to the idea that someone is hoarding oil on fears of a Russia-Ukraine conflict. We’ll find out if that’s coming in the next three weeks. If not there could be payback but all that might simply be overthinking it. This isn’t the first episode of geopolitical tensions in the oil market. Two years ago, the US was assassinating an Iranian general and Iran retaliated by firing rockets at a US base. That rally barely lasted a day.
That oil continues to rise with a known geopolitical risk in the mix probably just underscores how tight the market is. At the end of the day, the trade is probably just to go with the chart: