If you’re trying to determine what’s next for oil prices, there’s something you should know that very few people are talking about.
Despite tensions in the MidEast, oil may not go a lot higher, even if the situation escalates.
That’s in part because Iran is being quietly but effectively neutered by a region in the MidEast called Fujairah. They just opened a new pipeline that could be a game changer.
The 48 inch diameter pipeline will transport oil from Abu Dhabi’s oil fields in the southwestern part of the UAE to Fujairah on the Emirates’ eastern coast, bypassing the Strait of Hormuz.
And that effectively could neuter Iran’s influence in the world oil markets because it reduces the need to assuage Teheran to gain access to the shipping lanes.
“The new pipeline can handle a 150,000 barrels a day. That’s not a small amount of oil,” explains CNBC Contributor Addison Armstrong of Tradition Energy on CNBC's Fast Money.
And equally important to the oil trade; “Iraq is now up to 2.5 million barrels a day. They’re trying to move oil too,” Armstron adds. “They’re trying to move oil through Saudi Arabia. That hasn’t been done since the First Gulf War.”
In other words, “All the physical infrastructure that can be leveraged in the Middle East to forgo putting oil on tankers and shipping it through the Strait of Hormuz is in play.”
Combine these developments with relatively weak fundamentals and Armstrong doesn't think oil can trade much above $100.