The price of oil jumped more than 3 percent to over $47 a barrel on Monday, largely for two reasons -- 1) speculation OPEC may cut output again and 2) due to a naval incident between the United States and China.
According to the Pentagon, Chinese ships shadowed and maneuvered dangerously close to a U.S. Navy vessel in what appeared to be an effort to harass the American crew.
"Crude prices are up, I think, in a knee-jerk reaction to the news," says Phil Flynn, analyst at Alaron Trading in Chicago.
Meanwhile, OPEC next meets on March 15 to set output policy again and the 12-member producer group says it could reduce output again.
What’s the oil trade now?
FM trader Tim Seymour says forget all that. It’s temporary.
Instead he’s got his eye on a more important confluence of events; futures prices. “The contracts out farther on the year are no longer much higher than the short term contracts.”
In other words oil is no longer in contango and that’s a bullish sign, according to Seymour.
“ConocoPhilips makes a lot of sense on relative value,” he says. “And the European oil companies look interesting. Look at BP and Total not only as plays on integrated oil but also for dividends.
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CNBC.com with wires