TMAD Commodities: WTI Reached $110, Can Oil Head Higher?

$USO $BNO $GLD $SLV $URA

Hello Traders,

Last week, I pointed out the huge buildup of bets (call gamma) targeting $140 on USO, and today we hit it. The spark was Trump’s prime-time speech from the Oval Office. Any hope for a quick ceasefire vanished after he pledged another 2 to 3 weeks of intense military strikes to finish the job. This dashed the market’s hopes for a short-lived conflict, triggering a massive wave of short-covering in oil futures as traders realized the Strait of Hormuz isn't reopening anytime soon.

Screenshot of last week showing $117 spot price

In Europe, diesel prices are rapidly approaching $200 per barrel as the supply shortage finally starts to bite. This massive deficit is sparking a wave of panic across the markets this month. Since Europe relies on the Middle East for about 20% of its diesel, they are now desperately looking elsewhere for fuel. This is going to fuel a massive surge in demand for US WTI, as it becomes the primary 'safe' alternative for global refiners. With USO hitting that $140 target today, the market is already pricing in this shift toward American oil.

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