While the oil market expected crude inventories to finally rise, the EIA report of yet another draw last week helped prices rise even further in early trading, with Brent stunningly hitting a new high in years.
The storage level of crude oil is the lowest in years in the largest US hub and that caused a tremor through the market and raises the threat of declining oil availability.
The stocks draw was enough to lead prices higher this morning but the real question that the market is now grappling with is how high is too high.
While some projections are as bullish as $100, current price levels already start feeling high for traders, who always have an itch to reap profits from the rising prices.
Traders who had set $86 as their selling threshold took the opportunity to already pocket some profit and oil prices took a dive as a result.
Despite the profit taking today, the oil price trajectory is bullish for the rest of the year, as demand is rising amid a still tight OPEC+ output policy.
Prices have more room to swell amid the current energy supply crunch and the only way that seems able to somewhat constrain the rally is either government intervention at a tax or output policy level, or a major change of course by OPEC+.
OPEC+ has by far most of the remaining spare oil production capacity in the world and it will be very interesting to see if in the next meeting the group will recognize the need for even more oil in the market.
High oil prices are threatening economic growth and this is a macro concern for consuming countries, so producers may soon need to heed the call for more output that can make prices more palpable for buyers.
