Every person on the planet is now aware that early on Saturday night, June 21st, 2025, the U.S. military attacked and severely damaged (destroyed?) Iran's nuclear sites and presumably their ability to produce nuclear materials needed to create a WMD.
Now what? Will the Supreme Leader opt for rationality, wave the white flag of surrender to preserve political power, and look to a peaceful future (granted, a 180-degree departure from its 46-year modus operandi), or seek to perpetuate conflict with the West wherever he can?
No one knows...
However, looking at the setup exhibited by my BIG-PICTURE Chart of NYMEX Crude Oil, I can make a compelling argument that whatever is about to happen next in the Israel-Iran conflict, Crude Oil futures prices are poised to climb, perhaps violently.
While I can imagine scenarios that could result in a powerful upside spike in Oil prices (think closing the Strait of Hormuz, sabotaging the Oil fields, attacking neighboring oil fields) that would be designed to create maximum market chaos and damage to the global economy, that topple dominoes, leading to dangerously heightened geopolitical confrontations, it is my bullish technical setup and investor under-ownership of the Energy Sector that lead me to the conclusion that we should not dismiss a powerful rally in the commodity that propels energy equity names substantially higher.
Purely from a price pattern perspective, my attached Weekly NYMEX Oil Chart shows the April 2020 Pandemic Low at $6.50/bbl, which concluded the major bear phase from the July 2008 ATH at $145.07/bbl, and was followed by a two-year upleg to the March 2022 high at $130.50/bbl. The subsequent weakness into the April-May 2025 low-zone, circling $55/bbl, retraced an exact Fibonacci 62% of the 2020-2022 advance, which has been followed by the May-June 2025 rally to last week's high at $74.60/bbl.
My contention from the price setup is that a new upleg is in progress within the extension of the post-Pandemic 2020 bull market that has as its next target a confrontation with multi-year resistance at $92-$95/bbl, that if taken out on a weekly closing basis, will point nearby Crude Oil prices toward $120/bbl.
It is fitting that the background for higher oil prices amid a conflict in the Middle East, which is outweighing domestic "drill baby drill," ironically comes at a time when the US Strategic Petroleum Reserve (SPR) is 30% to 40% below "normal" (see the Goldman Sachs SPR graphic below), and when Wall Street fund managers are acutely underweight the Energy Sector (See B of A Survey below).
From a contrarian perspective, the promising near- and intermediate-term technical setup, the deficient level of oil in the SPR in the event of an emergency, and an investment community that has ignored and underinvested in Energy for two years suggest that a bullish surprise could be developing in and from the Oil market.
What is my Big Picture technical setup in XOM (Exxon Mobil) telling me about the prospect of an upside surprise in the Energy Sector? The attached 25-year Weekly Chart (see below) shows the price structure poised for upside continuation and acceleration if XOM climbs and closes above nearest resistance from 116.80 to 119.91. A weekly close above 119.91 will trigger considerably higher target zones as demarcated on the chart.
As long as any forthcoming weakness is contained above consequential intermediate-term support at 98 to 101, my pattern and momentum work will remain very "friendly" to higher XOM prices.
The upcoming days and weeks should be fascinating for oil prices and the Energy Sector in general, and for XOM (and other companies) in particular... MJP
