May 18, 2015 – Oil prices are on the rise today extending a record run in weekly gains. Crude prices increased for 9 consecutive weeks now – that’s the longest weekly streak of gains in at least thirty years but could that rally in oil be too good to be true?

When asked if we are going to continue to see this run-up in oil, Bob Iaccino, a Tethys Partners Chief Marketing Strategist says, “Oil prices haven’t changed really at all and that’s one of the reasons why your comment about the rally getting a little bit long in the tooth is probably pretty accurate.  I’ve been looking for about 63.50 and possibly 66.00 dollars at oil going up in the seventies; now to me seems to be  completely geopolitical what you’re seeing with ISIS moving in  the spike that we saw on Brent overnight but other than that the global oil  supply glut has not changed.”

Saudi Arabia is still pumping at record levels talking about possibly pulling back but that seems a little bit of an empty promise according to specialists.  Rig counts only fell by 8 on Friday, that is the slowest since November 7th in terms of the drop in rigs and it looks like the slumping rig counts might actually be bottoming. It looks like the rally may have found a cap somewhere in the low 60 possibly mid- 66 level and that of course is short of any acceleration of geopolitical problems.

BgOilRigThat movement that we saw overnight in oil prices is not a huge movement, we’re not seeing  multiple percent gains in oil on that news  so even if we do get some various conflict points around the world  how much of a boost is that really going to give to oil?  The overall dynamics in crude oil are not changing, this is a market that probably has not found its long-term bottom.

When you got the demand from the summer driving season it looks much lower than 2011 and 2012 but it still is the summer driving season.  We’ve got refineries pumping at record levels.  the refineries are producing crude oil products at the highest level since 2010, what you’re looking at now is a potential product glut that is going to take the gas prices down, potentially help the economy globally and then you might see a little bit of a temporary spike in crude oil again but what we’re seeing now the market is giving us the price where shell makes sense.

If you have supply-demand dynamics staying largely the same are we going to really see much movement up or down at this point? It seems the rally is capped at this point and so the sideways movement over the summer seems to make sense. Supply-demand is not changing in the short term but in the long term we have demand destruction.