Crude oil hit $100 for the first time ever last week. In inflation adjusted terms, it was closest to this level in 1979-1980 during the Iran Hostage Crisis when the price .

As shown in the monthly crude oil chart, the price and volume traded in crude oil has been growing exponentially since 2003. As indicated by the widening of the upper and lower price trend lines, the volatility is increasing. For the past six months, prices have been above the 5-period moving average (show in white) and been riding up the upper Bollinger band (two standard deviations above the mean, shown in pink). While it would not be surprising, if prices touched down to the lower Bollinger band in the next year, it seems highly likely given it’s trajectory that prices exceed $150 per barrel in the next couple of years. Given the supply and demand situation and assuming continued global oil dependence, prices may only begin to stabilize when significant “demand destruction” occurs, mostly likely in the form of a severe economic recession or depression.

On an ominous note, the RSI just crossed over 70 for only the fifth time since 2002. When the 14-month RSI is over 70, the monthly price has been trending up strongly for the last 14 months and is considered to be in the overbought zone which is considered a potential selling point. That being said, while the RSI remains over 70, the commodity is considered to be in a momentum period and could easily rocket up. Usually, however, crude has not stayed above 70 for long. A common selling signal is when the RSI crosses back under 70.

The last two candlesticks had upper shadows and one is developing for this month at the moment which is not surprising given that the price at the upper Bollinger band. It will be interesting to see if crude tests the upper trend line at $102 created by the upper shadow two months ago.