Relax! Oil will sell off soon: Pro
Will the crude rally derail the economic recovery? Many traders have asked themselves that question, as crude is trading $10 higher than it was just a month ago.
The answer, however, depends how long oil stays at these levels. If oil remains at these levels for the remainder of the year, then yes, it will have a negative impact. But with that being said, I don't expect us to remain this high for too much longer.
The fundamentals of this market, in my opinion, don't justify $107 oil. We are very near record supplies in Cushing, and the demand for crude, while higher than it was, is nowhere near the levels we saw just a few years ago.
And as new technology and new efficiencies are implemented, crude demand should not increase in any substantial way. We are only a few weeks from the end of driving season, which means that one of the main drivers of crude is about to be removed.
For all these reasons, barring any unforeseen issues such as hurricanes or geopolitical problems, crude should be topping out at these levels.
So how am I looking at the crude chart now?
The $108.50 to $109.50 area has provided good resistance. Under that, look at $107.50. And if we get through $105, then $102 is right around the corner.