With hedge fund short positions near record highs and speculators at their least bullish in almost five years, oil prices have spurted higher in the early trading as the diplomatic gloves come off in The Middle East. Despite record levels of crude inventory around the world, WTI Crude is trading above $38, up over 3% from its $37.07 close on New Year's Eve. Algos ran the stops above last week's highs ($38.32) but for now prices are not as excited as many would have expected.

WTI tags last week's highs but is holding for now...

A Middle East expert has warned that the conflict between Iran and Saudi Arabia may lead to a larger holy war in the Middle East, escalating to World War 3.  Russian Middle East expert Vladimir Ahmedov says that following the Saudi execution of Iran’s prominent Shia cleric Nimr al-Nimr, and with Iran’s Supreme Leader promising “divine vengeance” against the Saudi regime, a war between the Sunnis and Shiites could happen.

Submitted by Adam Taggart via PeakProsperity.com,

Actuary Gail Tverberg explains the tight correlation between the rates of GDP growth and growth in energy supply. For decades, energy has been becoming more costly to obtain, and instead of accepting lower GDP growth, we have been using debt to fund further energy exploration and extraction.

That strategy has diminishing returns, Tverberg warns. And we are close to the moment of reckoning: 

Donald Trump told a crowd of supporters that both Hillary Clinton and the Obama administration were to blame for the creation of ISIS during a campaign rally in Mississippi on Saturday night.  The Republican presidential candidate told the crowd that he had previously told the American government to bomb the oil assets belonging to ISIS before Russia began doing so. “I’ve predicted a lot of things, you have to say, including, ‘Get the oil, take the oil, keep the oil.’ Right? I’ve been saying that for three years, and everybody said, ‘Oh, I can’t do that.

Iran’s powerful Revolutionary Guards have warned Saudi Arabia that they will suffer a “harsh revenge” following the execution of Sheikh Nimr al-Nimr.  Iran have warned that “the unjustly spilled blood of this oppressed martyr will no doubt soon show its effect and divine vengeance will befall Saudi politicians.” Express.co.uk reports: The move appeared to end any hopes that the common enemy of ISIS could lead to rapprochement between the two countries.