Oil Prices May Have Further to Fall

On May 10th we advised clients about the potential for a 2 week pullback in oil prices into the week of May 21st based on our models. The week of the 21st actually turned out to be the sell-off as prices tumbled through $70 per barrel in WTI and this warns of a more prolonged pullback, possibly into July.

The recent move higher in oil prices has been largely driven by geopolitical concerns in the Middle East, however tensions surrounding Iran and Syria have cooled alongside the news of a North Korean summit with the U.S. and we have warned for a few months that oil had become a “one-way” trade with large speculative long positioning, which could exacerbate any sell-off. We will monitor the price action in the coming weeks and update further on this.