The oil markets have been in intense focus recently and oil has been a major gainer on three things: falling inventories, rising demand and OPEC policy.

1. Falling inventories. The sharp rise in the natural gas markets creates further pressure for oil. The higher natural gas markets go, the more attractive it will be to shift to using oil.

2. Demand is expected to rise on falling global COVID-19 cases and rising vaccination rates. The twin driver of a drop in global COVID cases and a rise in the vaccination rates is supportive for oil.

Nearly 50% of the world’s population now has at least one shot of the vaccine.

3. Masterful OPEC handling of the crisis. The recent handling of the production levels last week was particularly good in guiding prices gently higher.

All of the above makes oil a buy on dips with $77 the break of previous resistance and a good place to manage risk from. Some analysts have been speaking about golf reaching as high as $100. That level technically looks possible and would be up at 2014 highs. The key technical resistance at $77 has been broken last week, so it is reasonable to expect buyers on a first re-test this week.

The main risk to this trade would be if Iran’s oil supply comes back online with a renewed US deal. Another risk would be further outbreaks of COVID reducing demand. However, for now, the risks look firmly tilted to the upside for oil due to the above factors. Also, risk can be tightly managed with stops sub $76.