Oil on Edge: War Escalates as $100 Breakout Comes Into View

Headlines & News Flow:

• Israel strikes key Iranian oil & gas fields overnight
• Iran re-launches strikes on neighbors
• Iran security chief warns that an end to the conflict will not result in business as usual relations through the Strait
• Fed meeting today – inflationary pressures building
• PPI report today – hot – inflationary pressures building
• Reported fuel shortages in Asia
• Take with grain of salt
• Australian Central Bank – rate hikes – inflationary pressures building
• Heating oil crosses

Opinion & Outlook:

Iran has made it clear that they are going all-in, no matter what the Trump administration or the West decides. The Iranian leadership has clearly stated and outlined that attacks will continue with US forces in the region, and they will likely continue if US forces leave the region. The regime is forcing the West to play its hand in full, and it’s increasingly likely a full-scale ground assault is in the near future.

The dark-horse catalyst I’m seeing is a Ukraine – Russia resolution. Looking at:

• Crypto – 3month liquidation
• EU Demands – Demanded access to Russian Oil & Gas from Ukraine (pipeline access)
• Secondary Sanctions – Loosened officially for S.E. asian buyers – but realistically will not be enforced
• Putin Distances – Putin’s move to actively distance himself from Iran & new Leadership
• Trump – China – Visit to align with Russia – Iran – Trade goals?

Technical Analysis

Key levels for the rest of the week include 95.71-100.00*** on the upside and 91.85-91.27*** on the downside. A settlement out above that 100.00 range will likely push futures up towards the 111.00 level quickly. Volatility at that point would likely feature a resurgence.

A settlement below 91.27*** sets us up for a run back to 85.00 first, then toward 80.00.

Volatility will likely explode (once again) if we break this trading range. Directionally, this could be in either direction; catalysts are binary, but probabilities and the chart do not favor an orderly consolidation within this 90 – 100 range.

The notes from yesterday, technically carry through to today. If we do get The Unlikely Consolidation – and get a normalized establishment of a trading range between 90-100 I will be very surprised – but across risk-assets, a Q2 into Q3 of chop is starting to look like a real story.