Illustration: Aïda Amer/Axios

Oil prices have skyrocketed so far this year, but traders aren't filling their swimming pools with gold coins just yet.

Driving the news: Crude prices rose 3% yesterday after the State Department said it would not extend waivers allowing nations to bypass U.S. sanctions and import oil from Iran. International standard Brent crude prices have risen upwards of 30% so far this year and U.S. WTI prices close to 40%.

Context: This year's rally feels eerily similar to last year when oil prices spiked above $85 a barrel in October, only to crater near $50 in December. Traders were caught on the wrong side of the unwind, with bets that prices would rise outnumbering contracts betting it would fall by 9 to 1.

  • "This is definitely not a crowded trade. ... Everybody still remembers getting burned in Q4," Michael Tran, RBC Capital Markets managing director of global energy strategy told the Financial Post.
  • Tran said the number of long oil contracts currently outnumber shorts by just 4 to 1.

The big picture: The problem is that oil prices aren't rising because the economy is improving and there's increasing demand, Jason Trennert, chairman of Strategas Research, said in an interview with CNBC on Monday. They're rising because of politics. That's not a recipe for a long-term run.

  • Barclays' commodities team also expressed doubts about a lasting move higher. "A sustained rally in oil prices would remain subject to structural limits," analysts said in a note to clients. "We do not expect a further reduction in Iranian supplies in and itself to have a material effect on oil prices over the longer term."
  • Goldman Sachs' analysts note they are keeping their price target unchanged because of expectation for "better supplied markets next year and the still high uncertainties" surrounding production.

Yes, but: Much of the 2018 downturn in oil prices came because the U.S. instituted the waivers, and the Trump administration is showing little appetite to keep them in place. And with Venezuela's oil production at historic lows, 2 of the world's major producers are on the sidelines.

The bottom line: For a sustained rally in oil prices, demand will need to pick up globally, which will require healthy manufacturing and industrial economies and citizens looking to travel. Whether oil can sustain its surge this year should provide some clarity on the health of the world economy.

Go deeper: Trade wars like Trump's threaten U.S. oil and gas exports

Go deeper

Amy Coney Barrett's immediate impact

Illustration: Eniola Odetunde/Axios

In her first week on the job, Amy Coney Barrett may be deciding which votes to count in the presidential election. By her third week, she’ll be deciding the fate of the Affordable Care Act.

Where it stands: The Senate votes on Barrett’s nomination tomorrow. If she’s confirmed, Chief Justice John Roberts is expected to swear her in at the Supreme Court within hours, an administration official tells Axios.

Texas Democrats beg Biden to spend now

Photo: Ron Jenkins/Getty Images

The Biden campaign is rebuffing persistent pleas from Texas Democrats to spend at least $10 million in the Lone Star state, several people familiar with the talks tell Axios.

Why it matters: If Texas — which has 38 electoral votes and is steadily getting more blue, but hasn't backed a Democrat for president since 1976 — flipped to the Biden column, it would be game over. But the RealClearPolitics polling average stubbornly hovers at +2.6 for Trump — and Team Biden appears more focused on closer targets.

2 hours ago - Politics & Policy

Election night in Trumpworld

Photo illustration: Aïda Amer/Axios. Photo: Chris Carlson-Pool/Getty Images

A luxe election-night watch party at the Trump International Hotel on Pennsylvania Avenue is being planned for President Trump's donors, friends and advisers — but Trump's hand in it is minimal because he's "very superstitious" — people familiar with the plans tell Axios.

The big picture: This "mecca for all things MAGA," as one adviser described it, is one of three hubs where they say Trumpworld will watch returns. The others are the war room at campaign HQ in Rosslyn, Virginia, and the White House residence, where Trump and the first lady will gather close family and advisers before heading to the hotel later that night, the sources said.

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