Usually, the drop in inflation expectations would be enough to see oil to start losing value. The 5 and 10-year break even inflation charts have been showing declines due to expectations that the Fed will hike interest rates this year. Usually, oil would follow lower. However, low inventory levels, geopolitical troubles, and the EIA revising up demand expectations have all helped oil higher. Some analysts, like JP Morgan, are calling for oil to be at $100 per barrel. With this mixed picture, it is also helpful to note the decent seasonal pattern.

From January 25 to March 5 oil has gained 15 times in the last 22 years. The average return has been an impressive 5.41%. Last year saw gains of over 25%! Will oil follow its seasonal pattern higher this year again? Or will inflation expectations allow it to current lower?

Major Trade Risks: The main risk for oil’s outlook depends on inventory levels, OPEC+ policy decisions, geopolitical issues (Russia & Ukraine), and oil demand on any Covid developments.