"I do think it's still up," Silverman said. "Some people say the heightened tension in the Middle East is already priced in but I don't believe it. If an attack happened, we would see a tremendous spike in oil instantaneously. I was reading a speech [Israeli prime minister Benjamin] Netanyahu gave a few days ago and I was surprised. It seemed like he was preparing everyone in Israel for an attack on Iran and came across as if this will happen soon regardless of what world leaders say."
Silverman said being flat oil is as bearish as any investor should get now, and in fact, he is currently on the sidelines waiting for a drop in WTI to $100 before getting long again.
"Going against oil doesn't make sense here, but it feels to me like no man's land," he said.
Smith said the Saudis are indicating they will take further steps to keep prices in check through ramping up to 12.5 million barrels per day if need be and the headline-grabbing action of sending increasing cargoes to the U.S. is a signal of their intent; it's also a signal of their discomfort with prices where they currently are. However, he also noted Saudi minister of petroleum Ali al-Naimi's statement that markets are already oversupplied by 1.5-2 mbpd highlight this frustration.
"I think the fact that Saudi ramped up production to a 31-year high as prices rallied earlier this year indicates it is concerned about current price levels, let alone any further run-up from here," Smith added.
This doesn't mean the Saudis can wipe out the current geopolitical risk premium, though.
Silverman said a slowing in the global economy triggered by a marked slowdown in China would have more power to take the upside out of oil than Saudi Arabia can do by offsetting the geopolitical risk.
That's something to watch for in the months to come, however, at the moment, his finger is closer to the "buy" button on oil as he watches events in the Middle East more closely and expects the risk premium in the price of oil to have another leg up.
-- Written by Eric Rosenbaum from New York.
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