Oil is in an interesting spot this week.
The broader theme in the market this week is increasing worry about a recession and a hard landing. At the same time, OPEC countries and Russia on Monday delivered a surprise output cut.
In addition, today's weekly inventory data was surprisingly tight with oil, gasoline and diesel stockpiles all drawing down.
The result is a market that's traded sideways for three days as it can't find the strength to break the top of the recent range but is in danger of supply shortages so can't go down as well.
If there is a recession (and especially if the Fed is slow to respond) and it spreads globally, then the risks to the downside will increase. Still, you have to suspect there's an OPEC put at $70 now and that creates a cushion.
What's next? I think markets will continue to go where economic data leads but it's starting to shift to a paradigm where the burden of proof will be on data to prove the economy is ok and that the assumption will be recession. That will make it tough for oil to climb from here.
