I changed my mind as a result of the terror alert. U.S. intelligence officials say al-Qaeda appears to be planning an attack against unspecified targets, and U.S. embassies and consulates in 19 countries in the Middle East and Africa have been closed as a result. According to government officials, this is one of the most serious threats since 9/11.
In my view, it is not prudent to be short oil at this time, as the embassies that have closed are in the richest oil-producing region in the world. If there is some sort of attack, whether in the United States or overseas, you could see crude bounce to $110 in a matter of minutes.
So even though crude has become overheated from a fundamental standpoint, I have learned from my 20 years in these markets that when geopolitical issues come to bear, the crude oil fundamentals take a back seat.
I am now long crude at $106.10 and have placed a stop at $104.80. My target on the upside is $108.00—but of course, if something happens, we could see prices climb much higher.