Oil retraces 50% of the omicron rout. Does OPEC really have the barrels?

Oil now above $72.50

You could draw this one a few different ways but WTI crude is testing levels around the 50% retracement of Friday's blow up.

Note that the 61.8% level coincides with the small bounce high on Friday. That's going to be the key level going forward. A sharp drop like we saw Friday is the perfect time to use the fibonacci levels.

I think there's a good argument for caution in all markets because I think there's a natural inclination to be optimistic here. Of course, there are also the early reports about mild-to-moderate symptoms. I worry that's premature. It feels like a race to find good news right now.

In the bigger picture, this note from J.P. Morgan is doing the rounds. It suggests that OPEC+ doesn't have the spare capacity that it claims.

That's an idea that's been floating around for years. It makes sense that they would want to bluff because it would help them control the market and the idea they have more oil disincentivizes capex elsewhere.

In any case, those forecast for $125 per barrel next year and $150 in 2023 is intriguing. Might have wanted to save those SPR barrels.

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November 30, 2021 at 02:00AM

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