Oil: Fundamentals vs Technicals

1. There is no shortage of articles claiming a supply deficit in oil caused by various factors including the sanctions on Russia. I am not a crude oil analyst, but my view is that structurally-speaking, there is a net shortage or enough disruption such that the market behaves as if there is one. Point in favor of higher or sustained high oil price. There's evidence the economy is slowing, but that is a slow process. Unless Russia sanctions are lifted or tensions ease, bias should be towards higher prices in the next several weeks.

2. The chart looks bullish with a target around $170 and more likely an attempt on the $200 area in a blow-off top scenario.

3. The Federal Reserve's actions are bearish for markets. I place a speculative value on Fed comments because they seldom follow through unless it is explicitly stated, and even then they may not or quickly reverse. If they follow through on QT though, then by July or August at the latest, financial markets should have experienced a major correction with the bank reducing its balance sheet by $95 billion per month.

My expectation is oil goes lower. The $85 per barrel area would test the massive base on the chart. Very bullish if it doesn't go lower. Below that, support might lie in the $60 area, a better than 50 percent pullback from the high this year.