Commodity ETF Alert June 2014 Issue

| June 12, 2014

 

Commodity Outlook:  Crude Oil

Time is of the essence today…

In case you haven’t heard, things are going to heck in a handbasket in Iraq.

There’s a large upwelling of violence occurring in the Middle Eastern country as I write.  Sunni militants operating under the name Islamic State of Iraq and al-Sham (ISIS) are sweeping across the northern portion of the country.  Apparently, the rebels have already taken control of Mosul and Tikrit- two of Iraq’s key northern cities.

And now the latest AP news reports reveal the rebels are making their way towards the capital city- Baghdad.

According to various sources, Western military officials are shocked at the speed the militants overtook the northern part of the country.  As a result, there’s little confidence the Iraqi army can stop ISIS’ southern push.

What does this information have to do with commodities?

Oil is surging on the news.

In fact, the commodity is up $1.50 a barrel in today’s trading session.  And given the situation, it’s highly likely crude continues higher in coming weeks.

You see, Iraq supplies around 3.5 million barrels of oil a day to the global market. Unless ISIS is stopped in their tracks, there’s a substantial risk of supply disruptions out of the war-torn country.

And believe me, the last thing the global crude market needs right now is another supply disruption.

As you may know, Libya is already having problems with production due to its political problems.  And given the ongoing situation in Ukraine, there’s still a chance of Russian oil coming off the market.

Folks, it looks like we’re in for another Summer of high oil prices…

In fact, I wouldn’t be surprised to see West Texas Intermediate (WTI) test last year’s high of $111 a barrel in coming months.  That’s why I’m recommending we go long the US Oil Fund (USO) at any price under $39.20 a share.

Let’s look at a chart…

Technically Speaking:

USO Chart

As you can see, USO is accelerating higher in response to the geopolitical upheaval in Iraq.  It’s very likely oil, and USO, move higher in coming weeks as these issues force investors to price a substantial fear premium into the market.

WHAT TO DO NOW:

US Oil Fund (USO) is trading at $38.89
Buy USO up to $39.20 per share
Our profit target is $43.00 or more

 

Category: Commodity Trading

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