Crude oil hasn’t seen these kinds of highs in more than three years. Now market watchers are asking, “Will it stay there?”
To Boris Schlossberg, managing director of BK Asset Management, the answer lies in the Middle East.
“That’s the key story here: Iran. Obviously geopolitics is what’s driving oil at this point,” Schlossberg told CNBC’s “Trading Nation.”
Crude oil spiked 3 percent on Wednesday to settle at its highest level since November 2014. Crude’s rally was in response to President Donald Trump‘s decision announced Tuesday to abandon the Iran nuclear accord. An exit from that deal would reimpose sanctions on the oil-rich country.
Indeed, oil prices rose again Thursday after Israeli airstrikes on Iranian positions in Syria following an Iranian rocket barrage aimed at Israel.
“I think the story is not going to go away,” Schlossberg said Wednesday. “Even if the tensions kind of ease, they’re really boiling on the surface and I think that pretty much keeps oil prices elevated for the near term.”
Trump has promised to enact the “highest level of economic sanctions” against Iran, which would cut off the U.S. market from its oil exports. Iran exported more than 2.6 million barrels of oil per day in April, the third-largest crude exporter in the Organization of the Petroleum Exporting Countries. Sanctions could impact about one-eighth of total exports, analysts say.
“Things like MLPs, oil and gas MLPs, may be an interesting bet on a long-term basis simply because I don’t think it’s going to be a parabolic move up and down in oil,” said Schlossberg. “I think oil stays bid for quite a while because geopolitical tensions are going to stay with us for quite a while.”
Energy stocks were the best performers on the S&P 500 on Wednesday. The energy sector has risen more than 12 percent this quarter and is up 5 percent this year.