Iran Accord Nukes Oil Prices
Today’s Spotlight Market
Iran agreed to curb its nuclear program and allow more intrusive inspections beginning on January 20.? In exchange, Iran will get partial relief from sanctions imposed by the EU.? The OPEC nation suffered a huge reduction in Oil exports as a result of the sanctions.? The easing of sanctions against Iran comes at a time when the North American Oil market is very well supplied.? There is now a 6 to 12-month timetable to come to a final agreement.? While the agreement is not final, it is part of a series of milestones in relations between the US, via its allies, and Iran.
Fundamentals
With the sanctions against Iran being partially lifted, Crude Oil exports from the country should be more than able to fill the vacuum created by the unrest in Libya.? Libyan output? rose to 592,065 on January 11, so there may not be much of a shortfall for Iran to make up.? In addition to adding to current supply, the preliminary nuclear accord has erased some of the fear premium that has been priced in the Crude Oil.? This could be a severe blow to the price of Brent Crude Oil, which may pressure the price of the WTI contract.? Brent Crude Oil is representative of European Oil prices, and Europe has been much tighter supply-wise than North America.? Speculative long positions in Brent Crude Oil have fallen to their lowest level in six months.? The speculative long position in the WTI contract has fallen for the first time in six weeks.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the February Crude Oil (CLG14) contract continuing to trade lower on the New Year.? Prices are trading near support at the 91.25 level.? Failure to hold support at 91.25 could bring a test of 90 or, possibly, the mid-80?s.? The result of recent price action has been oversold conditions on the RSI, which may be supportive of prices.? However, it should be noted that downside breakouts in technically oversold conditions could be explosive, as value buyers could do an about face and sell out of their positions.
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