Bullish headlines helped crude oil stage a strong rally to end the week Friday, and more news over the weekend has helped push WTI and Brent to fresh 2 year highs this morning.

Friday’s trading session started with Crude oil lagging in the morning while gasoline prices were pressing higher.  That pattern was reversed in the afternoon after the Baker Hughes rig count showed a decline of 8 oil rigs in the US last week, and following an announcement by the Niger Delta Avengers that their cease-fire on oil assets in the region was officially over.  While no attacks have yet been reported, the group has clearly stepped up their marketing efforts via their website and Twitter feed.  (Those looking to contact the group can do so via this link.  http://www.nigerdeltaavengers.org/p/contact-us.html)

After that combination of headlines helped push oil prices to a strong Friday finish, Saudi Arabia dominated the headlines over the weekend with a string of news that seem fitting of a Tom Clancy novel.  First there was a missile fired from Yemen that was shot down over the capital city of Riyadh, raising the stakes in that long-term conflict.  Next up there was a widespread power grab by the new crown prince that arrested dozens of rivals in prominent positions – including billionaire investor and CNBC regular Alwaleed bin Talal – and putting new regime-friendly leaders in charge of the country’s military and oil.  If that wasn’t enough, the Lebanese Prime Minister resigned Saturday (in a broadcast from Saudi Arabia) and then overnight the Saudi’s shut down access to ports in Yemen after yet another attack in the Gulf of Aden.

So what does all this mean?  For one, the Saudi’s are leaving little doubt that there’s a new sheriff in town who’s not messing around.  What that means for oil prices is less clear.  Short term, there should not be any direct impact to oil supplies (which probably explains why prices are only up 40 cents so far) although the risk of a conflict with Iran (who backs rebel groups in both Yemen and Lebanon) has certainly been ratcheted up several notches in the past few days.

Speculators are growing increasingly bullish on energy contracts.  Net long positions (bets on higher prices) increased in all of the big 4 contracts last week, due to a combination of new length being added and shorts being squeezed out, pushing Brent and ULSD positions to new all-time highs.  With so much bullish news to digest, the extreme length held by money managers should be a cautionary note as it’s one of the more reliable contrary indicators in our markets.  As an example, the last time Brent crude was trading north of $62 2 years ago, speculative net length had just reached a new all-time high, and prices were cut in half over the next 6 months.

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