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Wondering just how much lower oil prices will likely fall? With crude trading around $79, we’re hearing not a lot.Ed Morse, Citigroup Head of Commodities Research tells us crude looks like it’s oversold and there are a slew of catalysts on the horizon that will send it higher.Number one is summer driving. “Demand for crude increases substantially between now and August,” he explains on CNBC's Fast Money , as Americans take vacations.
Also he thinks demand has been lower than expected due to maintenance issues. “There’s been a delay in refineries coming out of maintenance and that’s put downward pressure on demand, too,” he says.And he sees supply coming out of the market. “The Saudis are expected to send less supply onto the market” over the summer. It’s widely believed that Saudi Arabia has sent additional oil onto the market allowing in an attempt to subordinate Iran.
However, with a ban on Iran imports expected to go into effect on July 1st, Saudi Arabia will probably dial back the spigots.All told Morse says the path of least resistance is higher. “Over the next 3 months oil (WTI) should average around $90,” he says.
If you're looking to trade the thesis, energy trader Joe Terranova suggests a long position in Hess, which often moves in tandem with the spot price of crude.
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