As the situation in Afghanistan and around the world becomes more problematic, oil investors are betting that the price of oil is going up. Indeed, a little-known technical indicator shows oil prices could spike as much as 50% in the coming months.
Oil prices are highly linked to geopolitics. Typically, the more chaotic a geopolitical situation is, the higher the price of oil. And perhaps there’s no other word to describe geopolitical world order right now, other than ‘chaotic.’
The U.S.’s capitulation to the Taliban and botched retreat has resulted in the deaths of 13 U.S. military members and over 160 Afghanis.
But, what happens once the U.S. is out entirely?
Despite boasting vast mineral reserves, Afghanistan has no oil. Theoretically then, a Taliban takeover should have a limited effect on oil prices.
Nonetheless, there is growing concern that the Taliban victory could have some spillover effects on oil-exporting countries in the Gulf.
Islamists in Pakistan and Bangladesh have hailed the Taliban takeover of Afghanistan as a victory. Many are concerned that Afghanistan could become a training ground for Islamists across the Indian subcontinent.
Other Jihadi groups such as the Islamic State and Aq-Qaeda will also likely get a boost. These groups have their differences, but they also share a common enemy; the United States.
Oil Could Spike 50% – Indicator Shows
Investors are watching the instability. A rare technical indicator shows that crude oil could soon spike up to 50%.
West Texas Intermediate crude has seen its shorter-term moving average cross above its longer-term moving average.
This is something analysts call a “golden cross,” a sign that points to likely further price spikes.
This has happened three times since 2000. Each time oil prices spiked from 20% to 50%. It is likely that this time oil will react the same way, analysts predict.
Oil has cooled down slightly from the rally first induced by a dispute among OPEC+ members. WTI crude was trading above $76, the highest level it was at trading since 2014.
OPEC+ members have since agreed to increase production. The Delta variant has also put downward pressure on oil prices.
But, technical indicators like this show that investors are already anticipating a change in trend, with geopolitics (along with bad monetary policy) being the likely driver.