Everyone’s talking about this morning’s WTI Crude Oil breakout above the 105 level that had served as resistance for quite some time. Crude is up big this morning as the Iraqi news I discussed here yesterday finally caught investors’ attention.
My friend Peter Boockvar had this to say about the significance of this week’s activity:
After seeing the loss of control to Islamist militants of major Iraqi cities seemingly out of nowhere to those of us who haven’t been paying attention and to think that the results of more than 10 years of war may be completely reversed, it’s hard not to think Obama reciting this quote from Godfather III, “Just when I thought I was out, they pull me back in.” The crude markets didn’t respond at all yesterday even though the news was on the front page of every newspaper but today aren’t ignoring the 4mm barrels of Iraqi oil hoped to be produced by year end as WTI is at the highest since September ’13 and brent crude is at the most expensive since July ’11. As most of the robust oil producing fields are far away from the violence right now, the immediate response is more psychological than anything but who knows where this goes. While of course this oil jump may not be sustainable if things calm, the rise in oil prices is also happening just as the inflation figures in the US have been ticking higher and Europe may get what it wants but for the wrong reason. It may also explain why US Treasuries are no flight to safety today.
Managing Director, Chief Market Analyst
The Lindsey Group