Crude oil is surging, but I'm not buying just yet

Crude oil is seeing an impressive week.

West Texas Intermediate crude oil broke above the $65 per barrel level on Wednesday on the heels of a surprise decrease in U.S. inventory, sending prices up to the highest level since early February.

While crude oil appears to be gathering momentum, I'm cautiously bullish on oil at this juncture. Here are some factors that would theoretically prop up prices.

Tensions have been escalating between Iran and Saudi Arabia as rhetoric over a nuclear arms race is creating anxiety between the two nations. We saw Crown Prince Mohammed bin Salman meet with President Donald Trump on Tuesday to further discuss the issue.

In addition, Venezuelan oil production has continued declining, to 1.548 million barrels per day, further lending support.

Venezuela has been under mounting pressure from creditors, causing most of its oil to be shipped off to pay its debts. Despite a small build in crude oil stocks in Cushing, Oklahoma, the Midwest's main shipping hub, the Energy Information Administration reported a decline of 2.6 million barrels, snapping three straight weeks of gains.

Still, with all this bullish news, it's hard to remember that the U.S. is continuing to pump crude oil at a record pace, starting the year off at 9.5 million barrels per day and more recently pumping over 10.3 million barrels per day as of early March.

One other wild card to watch is the U.S. dollar's reaction to the Fed's policy decisions down the road; remember, if and when the dollar gains strength against rival currencies, this may weigh on commodity prices. That may ultimately be the dagger that stops this rally in its tracks.

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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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