I am bullish on crude oil prices.
This Column March 31
Last weekend, Saudi and Russia announced a combined cut in production. The group promised to cut 1.5 MBD from May until the end of the year. West Texas Intermediate jumped over $4 Monday. The encouragement is that it held that level all week.
The rest of the energy complex has followed suit. A survey this week shows average at the pump price for 87 octane of about $3.50. The future price for gasoline has risen from $2.40 to $2.81 since March 2.
Team Biden is reaping the success of its war on carbon at all levels. The result has been caution on the part of U.S. Producers. No doubt that is the reason Saudi and Russia felt this was the time to boost their prices with a production cut. Words and deeds have consequences. This follows the hasty U.S. exit from Afghanistan which gave confidence to Putin he could invade the Ukraine. In similar fashion, Biden can now own the oil price increase after boasting he would make Prince Salman an international pariah. This of course caused the prince to strengthen his relationship with Putin. A weaker dollar is also boosting crude prices. Turkey has halted oil exports through its port at Ceyhan.
And recall Team Biden was going to replenish the Strategic Petroleum Reserve when oil fell to $70. Good luck with that now. And draining the SPR did nothing for his popularity. Biden’s numbers are still near previous lows.
Technically we now have a big gap on the oil chart after Monday’s jump. It does not have to be filled. We need a weekly close over $83 to break into new higher ground. I suspect this will happen. Crude traded at $130 just a year ago in March 2022. It has found solid support in the $65-70 level and is moving up.
Investors continue to crowd into fewer and fewer heavily weighted stocks which has kept the DJIA north of 30,000. Here is the score. Microsoft and Apple are 13.3% of the SPX. Seven stocks are 51% of the NASD 100 or NDX. They include Microsoft, Apple, Amazon, Google, Meta, Tesla, and Nvidia. This happened with the Nifty Fifty in the 1960s and in 1978 with IBM and ATT. Once heavy selling begins here, the bear market will resume with vigor. Higher interest rates are already cooling investor interest in stocks.
Layoffs abound and earnings are weaker, be prepared.
