Crude settled at a six-week high Thursday, supported by a combination of positive U.S. jobs and housing data, rising stocks and a lower dollar. Other energy commodities rose to multi-month highs. Brent clocked in at most expensive in eight months. Natural-gas futures rallied as well, on the back of a larger-than-expected weekly decline shown in a government report.
Oil futures closed Thursday at $102.31 a barrel on the New York Mercantile Exchange for a year-to-date gain of 3.5%. In terms of oil market sentiment, “afraid” would not be the word, but a “little nervous” said James Williams, an energy economist at WTRG Economics. “Iran speaks loud but isn’t known for carrying through on its threats.”
Iran announces advancements in nuclear fuel production while also offering to return to negotiations about the program, as Tehran comes under growing pressure to dial back its ambitions. Still, those threats are hard to ignore. Iran has warned that it may block the Strait of Hormuz, a key shipping route for oil, or disrupt crude supplies to Europe in retaliation for European Union sanctions on the nation. Tension between Israel and Iran is also worsening, and Iran has been boldly displaying its nuclear achievements in defiance of the West. “All the talk about Iran and market disruption, especially the militaristic saber-rattling, much originating with Iran, does lead to higher oil prices,” said Byron King, editor of investment newsletter Outstanding Investments. “It all makes markets nervous. This pushes oil prices upwards.”
Oil futures prices are trading at their highest level in six weeks. And, understandably, much of the climb has to do with Iran, which is the world’s third-largest exporter of crude after Saudi Arabia and Russia. Iran was one of the five countries that founded the Organization of the Petroleum Exporting Countries in 1960, and what Iran does has and will always matter when it comes to moving oil prices. But if history is an accurate enough model, confidence in Iran’s willingness and ability to follow through with its threats should be slim.
Will this upward movement continue in the long run? Looks like it, at least for now. The next serious resistance is at 103.40 and there are no indications that anything from technical or fundamental character could stop the rally in the oil. And if that level is crossed, the next stop might be far ahead – at 114. This is troublesome news for the producers, but at least until the political situation around Iran continues to be tense; the pressure will be on the upside
In the short-run however a correction is something very probable as both the stochastic indicator and the MACD are pointing that way. But don’t get your hopes up, because the bullishness of the big investors might be just too difficult to overcome.
All eyes are on Iran now and the volatility in the crude will surely be picking up. This is a good time for the swing traders to take advantage of the opportunities for profit and for the scalpers also as short-term durable trends will be forming. But to be able to take advantage of the entire turmoil, one should have to able to withstand serious single losses without being put out of his game.