Oil prices are hovering just below a three year high as many are still shocked that oil prices are again trading this high. Oil Prices started out strong on Iranian, Israeli war tensions but pulled back after data from Genscape put crude storage at Cushing, Oklahoma at 39.56 million barrels as of Tuesday, up 479,644 barrels from Friday. Cushing stocks saw a build with oil refiners in maintenance and Canadian crude imports picking up. Yet, oil came back strong as tensions remain high and the world is realizing that when it comes to crude oil production and supply, there is not any room for error. Sanctions on Iran could remove anywhere from 350,000 barrel of oil a day to a million barrels of oil a day from the world market and there is not a lot of places we can go to fill that void. OPEC and Non-OPEC nations are not in a hurry and secretly are glad that Iran will help reduce global supply even further and put more money in their pocket.
Many were lulled into a false sense of security believing that shale oil would keep the global market supplied forever and the world would have an everlasting cheap source of supply. Sure, you can point to tensions around the U.S. withdrawal for the Iranian nuclear accord or the total collapse of Venezuela oil production, but the seeds of the rally really go back further to a generational bottom that we predicted near $26 a barrel in 2016, to new super cycle where supplies soon would struggle to keep up with demand. We wrote that the double bottom at $26 a barrel was the equivalent of the double bottom near $10 in 1998-1999.
Since then, The Energy Report has had a long-term bullish outlook on oil after previously calling the break down in price before the OPEC production war. While we have not gone straight up from the lows our long-term price targets for oil have hit. This year we started the year with one of the more bullish calls on the street predicting that oil would hit $80 a barrel. Now others raising their price forecasts to meet or even exceed that price levels are becoming more common. The groundwork for this energy rally is now becoming clearer.
