The rally just won’t stop: WTI crude hits $87

At this point, I have to believe that there are oil buyers anticipating a Russian invasion of Ukraine.

The buying has been absolutely relentless. Yesterday was a tell with oil up $1 despite US stocks falling 2%. Moreover, the latest gains come despite a $21 one-way rally since December 20. Crude has only had six negative trading days in the past month and half of those were less than 40-cents.

Consumer demand for oil has clearly ebbed in the past month due to omicron, where strong restrictions remain in place in Europe, Japan, China and many other countries. Air travel has been hammered.

Some of that was likely over-priced in December but the scale of buying is incredible and that’s despite US SPR sales and ongoing OPEC+ production growth.

Today’s pop started after an explosion on an Iraq-Turkey pipeline but production there was quickly restarted so that could hardly justify another 2.7% rally today.

Technically, this is undoubtedly a breakout and a major one but it’s tough to get behind after such a strong one-way move and the threat of further lockdowns in China.

You won’t find a bigger oil bull than me but this is a truly impressive move and hard to pile into. I keep coming back to Russia-Ukraine as a potential catalyst and it would make sense for some countries (China? Europe?) to stock up ahead of any potential disruption.

That kind of thinking could also be behind the latest leg higher in precious metals.

Maybe this is it?