You got oil?

Is oil ready for a second move higher after weeks of sideways trading? We think so.

Saudi Arabia claims they have oil to ship as seen in interview in Financial Times yesterday: Saudi Arabia will act to lower soaring oil prices. We are more sceptical due to the following two charts:

Source: Bloomberg LLP

The trend for their claimed capacity also clearly falling:

Source: Bloomberg LLP

So yes there is same room to up the production, but probably not if the spike is based on increased geo-political tension. This headline caught our eye this morning: Israel Defence Forces remain on full alert over Passover The article goes on to say this is merely a new operational procedure, but also that even soldiers inside the Israeli army think its sign of increased alertness.

We are not trying to predict military action, but it is increasingly likely that energy prices will come to the focus with or without the Middle East component as price levels now starts to exceed old highs:

Source: US Energy Information Administration

Meanwhile gasoline prices in the US are getting closer and closer to old highs, and exceeding old highs do matter, according to academic papers.  They mean less disposable income and waning consumer sentiment.

Finally, on the charts (this is WTI Crude) we are nearing support levels - one possible trade would be to buy present level with stop 1-2 US dollars below the support seen on the chart.

Source: Bloomberg LLP

Steen Jakobsen