The United Arab Emirates calls out the U.S. shale producer and basically asks are you ready to capitulate? Oil traders may be asking that of the oil market as well as the market gets close to hitting a historically significant price point, 41.40 dollars a barrel the first Persian Gulf War high and the high price in the go-go 90s. It was also a price level that many in the nineties thought we may never see again. Just like Prince Alwaleeds pronouncement to Fox Businesss Maria Bartiromo that we will never see $100 again. While I agree that we may not see $100 a barrel for maybe a decade or more when it comes to oil you never say never. Get ready for a potential wild ride today and if sell off hard and reverse and go high today perhaps we could find a short term bottom.

Of course we are testing lower overnight. The United Arab Emirates oil minister, Suhail bin Mohammed al-Mazroui, said that the countrys oil output and strategy will not change and is telling the market and other producers that they need to be rational. You know kind of like making the U.S. shale producer an offer that they cant refuse.

Another sign that capitulation may be coming is some bold pronouncements on where oil may never trade again. When Saudi billionaire businessman, Prince Alwaleed bin Talal, told Maria Bartiromo that we will not see $100-a-barrel oil again, the market sold off. It seems that the Princes negativity reinforced the bearish sentiment. There is no doubt that $100 barrel oil wont come anytime soon, never is a long time. Yet he did change his tune by saying that the Saudi decision to not cut production was the right one because it would have only meant that the Saudis would lose market share as other producers filled the void. It seems that reluctantly the price is now onboard with the OPEC price war.

One supportive factor was China oil imports. Last month China imported a record 30.37 million metric tons of crude oil in December which is about 7.2 million barrels a day. That is just 2 million barrels less than the U.S. produces each day and 13% above the record high set in January 2014 of 28.16 million tons. Of course many speculate the real reason that China is buying crude is to stockpile it so the demand numbers might not exactly be indicative of current strong demand.

Another sign that capitulation may be coming is some bold pronouncements on where oil may never trade again. When Saudi billionaire businessman Prince Alwaleed bin Talal told Maria Bartiromo that we will not see $100-a-barrel oil again the market sold off. It seems that the Princes negativity reinforced the bearish sentiment. There is no doubt that $100 barrel oil wont come anytime soon, never is a long time. Yet he did change his tune by saying that the Saudi decision to not cut production was the right one because it would have only meant that the Saudis would lose market share as other producers filled the void.

We will also see the dollar add pressure as deflation fears continue to mount and UK Bank of England governor, Mark Carney, is going to have some explaining to do. The UK inflation to 0.5% in December, the lowest on record, and a rate that will require that he explain just why the UK is faced with a deflation threat. Can he say oil? Or maybe copper that hit another 5 year low? Or maybe just say oooppps.

Get ready for the API report tonight! Also we get the Energy Information Administration Short-Term Energy Outlook!

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Phil Flynn

The PRICE Futures Group

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About the author

Mr. Flynn is one of the worlds leading energy market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets.

Phil Flynns accurate and timely forecasts have come to be in great demand by industry and media worldwide. His impressive career goes back almost three decades, gaining attention with his market calls as writer of The Energy Report.

He is a daily contributor to Fox Business Network where he provides daily market updates and analysis. Phils daily commentary is also featured in Futures Magazine, International Business Times, Inside Futures, 312 Energy, Enercast, among many others.

Phil is a lifelong resident of Illinois. He attended Daley College in Chicago before beginning his career on the trading floor of the Chicago Mercantile Exchange which eventually led him and his team to The PRICE Futures Group.

Media highlights include: The President of the United States, Bloomberg, ABC, CBS, NBCs Today Show and Nightly News with Tom Brokaw, CNBC, CNN/CNNfn, FOXs OReilly Factor, PBSs The Newshour with Jim Lehrer and Nightly Business Report, MSNBCs The News with Brian Williams, The Wall Street Journal, Business Week, Investors Business Daily, The New York Times, The Los Angeles Times, Chicago Tribune, Associated Press, The Toronto Globe & Mail, Houston Chronicle, Futures Magazine, Inside Futures, and National Public Radio.