Where Will World Oil Prices Move On This Surprising News?

| March 27, 2015 | 0 Comments

oil pricesWorld Oil Prices: Due For A Rebound?

For the first time in a long time, investors are contemplating the upside potential in world oil prices instead of the downside.

What’s changed?

There has been a sudden uptick in Middle East political uncertainty.  As if dealing with ISIS isn’t enough, the war torn region is facing a new and potentially disastrous conflict.

If you follow the energy markets closely, you’re likely aware Yemen is falling apart at the seams.  Of course, Yemen is the southern neighbor to Saudi Arabia, one of the largest oil producers in the world.

I won’t regurgitate all the complex details of the situation here.  You can find what you need to know at any of the major news sites.

We’re here to talk about how the conflict is affecting world oil prices…

West Texas Intermediate (WTI) crude has rallied nearly $10 a barrel since setting new yearly lows at $42.50 on March 17th.  While I can’t claim the entire rally is due to the Yemen conflict, the last $5 of gains in WTI most certainly are.

Take a look at a chart of WTI…

World Oil Prices, a chart of WTI crude

As you can see, WTI has rallied sharply since mid-March.  But as you’ll also notice, the commodity is currently trading at a very important technical resistance area (red line).

What about Brent, the European crude benchmark?

World Oil Prices, a chart of Brent crude

Despite all the bearishness in world oil prices the past few months, Brent crude could not form a new low in March.

Ask any seasoned technical analysts and they’ll tell you the same thing.  When the price of an asset can’t form a new low after a long downtrend, the odds that a long-term bottom has been hit increase dramatically.

And when you throw Middle East political instability into the mix, the odds of further upside in WTI and Brent grow stronger.

But let’s not get ahead of ourselves…

World Oil Prices: This Might Get Interesting…

Much like WTI, Brent has strong overhead resistance (red line) it will need to break in order to attain higher prices.

But given the situation in Yemen, that scenario is quite possible.  

You see, there’s a vital shipping lane running through the Gulf of Aden, which is just off the coast of Yemen.

Oil shippers use this lane to bring oil from the Persian Gulf to the Suez Canal and the SUMED pipeline.  In case you’re unaware, the SUMED helps supply oil to Southern Europe.

If Yemen rebels manage to disrupt the shipping channel, the price of WTI and Brent will react quickly higher.

Isn’t it funny?

Just when everyone thought WTI was going to collapse in the $30 a barrel range, this totally unexpected scenario pops up.

And while it’s certainly unpredictable, if the wrong things happen at the right time, crude can rally higher in a hurry! 

Until Next Time,

Justin Bennett

***Editor’s Note***  Remember, if you’re looking for ways to capitalize off price fluctuations in WTI and Brent Crude, I’ve put together a handy list of the best ETFs to do it with!

BIO:  Justin Bennett is the head commodity research analyst at Commoditytradingresearch.com.  With over a decade of real world trading experience, he finds ways for you to consistently profit from movements in commodities and the companies producing them.  Sign up for our free reports and commodity newsletter at https://commoditytradingresearch.com/free-sign-up.

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Category: Brent Crude, Crude Oil, Energy

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.