Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Commodities: Crude Oil Is On The Bullish Staircase

By Andy HechtCommoditiesJun 14, 2021 12:36
Commodities: Crude Oil Is On The Bullish Staircase
By Andy Hecht   |  Jun 14, 2021 12:36
Saved. See Saved Items.
This article has already been saved in your Saved Items

This article was written exclusively for

  • Crude oil makes a new multi-year high last week - The next technical target is the gateway to triple-digit crude oil prices
  • A perfect bullish storm for crude oil
  • Factor one - US energy policy
  • Factor two - Inflation
  • Factor three - Demand is going nowhere but higher - Look at the price action in two other energy commodities

The spike low at negative $40.32 per barrel on the nearby NYMEX crude oil futures contract on Apr. 20, 2020, shocked the oil market and the world. Since crude oil futures began trading at the CME’s NYMEX division in 1983, the price had never declined below $9.75 per barrel. This century, the low was $16.70 before that fateful day.

Crude oil has taken a staircase higher since the April 2020 low. The NYMEX contract settled at $48.42 per barrel at the end of 2020, an amazing comeback from the low. In 2021, the price continued to rally. Crude oil has not traded below $50 per barrel since the first week of this year. It has not been below $60 since a correction took the energy commodity to $57.25 in late March. Last week, the price climbed above $70 per barrel for the first time since October 2018.

We have seen many commodities reach multi-year highs over the past weeks and months. The latest were copper, lumber, and palladium, which made new record peaks in May. Gold traded to its highest price in history in August 2020. Over the past months, many agricultural commodities reached multi-year highs along with other raw materials. While many have pulled back from the highs, last week was oil’s turn to appreciate.

Crude oil has been on a bullish staircase, making higher lows and higher highs over the past 14 months. The trend looks set to continue and take the energy commodity to higher highs over the coming weeks and months.

Crude oil makes a new multi-year high last week - The next technical target is the gateway to triple-digit crude oil prices

Crude oil continued to climb last week, reaching the highest level of 2021 and since October 2018.

Crude Light Weekly
Crude Light Weekly

Source: CQG

The weekly chart highlights the latest new high at $71.24 on Friday, June 11. Crude oil has been on a steady path of higher lows and higher highs since early November 2020, with the only correction this March. The price briefly probed below the $60 level and eclipsed $70 per barrel last week. Nearby NYMEX crude oil futures closed 2020 at $48.52. The price has not been below the $50 level since the first week of January.

Crude Light Monthly
Crude Light Monthly

Source: CQG

The monthly chart illustrates the next upside target stands at the October 2018 $76.90 high. The critical technical resistance level could be a gateway to triple-digit prices not seen since 2014.

A perfect bullish storm for crude oil

At the most recent high, nearby NYMEX futures made an incredible recovery from the Apr. 20, 2020 low. Crude oil moved $111.58 higher over the past 14 months.

Commodity prices have been in bullish mode since reaching bottoms in March and April 2020.

The last time the raw materials asset class experienced the current level of consistent price appreciation was following the 2008 global financial crisis, which pushed prices to lows in 2008, which gave way to rallies that took them to multi-year or all-time highs in 2011 and 2012.

So far, in 2020 and 2021, gold, copper, lumber, palladium, and soybean oil have risen to new all-time peaks. Grain and other agricultural commodity prices have risen to multi-year highs.

Last week, while many of the other high-flying commodities were consolidating after recent highs, crude oil took the bullish baton. At least three factors could make the current environment a perfect bullish storm for the crude oil market over the coming months and years.

Factor one - US energy policy

Perhaps the most bullish issue facing crude oil is the retreat of the world’s leading producer, the United States. On his first day in office, President Joseph Biden canceled the Keystone XL pipeline project that carries petroleum from the oil sands in Alberta, Canada, to Steele City, Nebraska, and beyond to the NYMEX delivery point in Cushing, Oklahoma.

More recently, the Biden administration banned fracking and drilling on federal lands in Alaska. The “drill-baby-drill” and “frack-baby-frack” policies under the previous administration are, as the Saudi oil minister said earlier this year, “dead.”

At the peak, in March 2020, the US produced an average of 13.1 million barrels per day. As of June 4, the Energy Information Administration reported that daily output stood at the 11.0 mbpd level, 16% below the high. Meanwhile, Baker Hughes said that the number of oil rigs operating in the US stood at 365 as of June 11, 166 higher than the same time in 2020. While the rig count is rising, production is likely suffering from increasing regulations, weighing on supplies.

As the US addresses climate change, the production of all fossil fuels will decline. The dramatic shift in energy policy comes at a time when inflationary pressures and energy demand are booming. Meanwhile, the oil market’s pricing power has passed from the US back to OPEC and Russia. After years of suffering from low prices because of US shale production, the international oil cartel and Russians are now positioned to squeeze US consumers. OPEC’s mission is to extract the optimal return for producers.

Factor two - Inflation

The US Fed created a tidal wave of liquidity via a Fed Funds rate at zero and quantitative easing to the tune of $120 billion per month. The Fed has said it is not thinking about tapering QE or increasing short-term rates given its “full employment mandate.”

Moreover, the tsunami of trillions of dollars in government stimulus in the US to stabilize the economy during the pandemic has added more inflationary fuel to the fire. After over a year of unprecedented monetary and fiscal policy accommodation, the latest May consumer price index highlights the impact. The CPI rose by 5%, with core inflation excluding food and energy increasing by 3.8%, the highest level in nearly three decades.

Inflation erodes money’s purchasing power and is bullish for raw material prices. Crude oil is no exception, as rising inflation is the wind behind the bull market trend in the energy commodity.

Factor three - Demand is going nowhere but higher - Look at the price action in two other energy commodities

After a year of social distancing and working from home, vaccines creating herd immunity to the virus is sending people back to work. As they travel to the workplace, gasoline demand is rising. Moreover, long overdue vacations will increase the demand for gasoline and jet fuel, both oil products. Energy demand is robust as COVID-19 fades into the rearview mirror.

Meanwhile, oil is not the only energy commodity experiencing a bullish trend these days.

Even though the natural gas futures market is in the offseason, where gas slows into storage, the price has been trending higher, making higher lows since June 2020.

Natural Gas Weekly
Natural Gas Weekly

Source: CQG

The weekly chart shows that natural gas futures traded to a high of $3.33 per MMBtu on June 11, the highest price of 2021, and double the price last June when it fell to a 25-year low of $1.432 per MMBtu. July natural gas futures settled at the $3.296 level last Friday. The last time the energy commodity traded above that price in June was in 2014.

Ethanol Swaps
Ethanol Swaps

Source: CQG

Meanwhile, at $2.31 per gallon wholesale, ethanol is trading at its highest price since April 2014. The biofuel has rallied on the back of higher gasoline, corn, and sugar prices. In the US, corn is the primary ingredient in ethanol. In Brazil, sugarcane is the input in the production of the biofuel.

Rising oil demand, the shift in US energy policy, and increasing inflation create an almost perfect bullish storm for crude oil’s price. The next test comes at $76.90 per barrel, which could be a gateway to the levels seen in 2014. Natural gas and ethanol have already hit the highest prices since that year, natural gas from the June perspective, and ethanol from its nominal price. Crude oil could be on its way to join them as the path of least resistance remains higher.

Commodities: Crude Oil Is On The Bullish Staircase

Related Articles

Commodities: Crude Oil Is On The Bullish Staircase

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Our Apps
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
Sign up with Email