Oh sure the market would like to focus on something so mundane as supply and demand but of course if we did that we would not be doing justice to the real market dynamics. Can talks with Iran stop a war or an Israeli attack against Iran and their budding nuclear ambitions? While the rest of the commodity complex frets about the fate of Greek bondholders, the oil market and oil consumers are still preparing for the possibility of war. Countries around the globe move to secure supply and look for alternatives to Iranian oil as embargoes and international pressure makes Iran oil look less attractive. So when we see even the slightest ray of hope that war can be averted, we seem to calm down if only for a couple of hours.

Oil pulled back as reported by Bloomberg, the European Union offered to restart negotiations with Iran over its nuclear program, seeking a full settlement of the clash that has pushed up oil prices and raised the specter of war in the Middle East. In a statement on behalf of China, France, Germany, Russia, the U.K. and the U.S., EU foreign policy chief Catherine Ashton urged Saeed Jalili, Iran's nuclear envoy, to meet her to seek an accord in which Iran would renounce the pursuit of weapons while retaining the right to generate nuclear energy. Ashton offered the negotiations only hours after U.S. President Barack Obama called for more time to let diplomacy and sanctions solve the standoff with Iran.

We are seeing increased demand for oil not because the usage is high but we are seeing demand as countries and users around the globe get prepared for what could be some worst case scenarios. Oil speculators are keeping the buying in check as they assume the risk for the buying surge and help temper the emotional buying. The market seems to believe that the risk of an imminent attack on Iran is less likely with offers to renew negotiations with Iran and the promise by Iran to allow nuclear inspectors in to some sensitive and previously off limit areas.

Yet still the market has its doubts. The AFP reports that talks on Iran's controversial nuclear program will fail if world powers use pressure during the negotiations, Iranian parliamentary speaker Ali Larijani said Wednesday. They [world powers] should pay attention that if they want to continue pressure in the talks, it will achieve nothing, Larijani was quoted as saying. His remarks came after world powers agreed on a renewed dialogue, which has been stalled for more than a year, with Tehran on its nuclear program.

Dow Jones reported that Israel said that it welcomes the possible resumption of international talks on Iran's nuclear program, but it must prepare for the chance they will fail, Israel's national Security Council chief said Wednesday. If they fail then the risk of war will go up and based on market action many are not that optimistic.

At the same time the risk of US involvement in Syria is rising. The US is pushing a new resolution in the UN and one that China and Russia may back but with the mounting bloodshed and pressure from Senator John McCain many may be asking why the President let the killing continue. It seems the White House is getting ready for Plan B if the resolution fails.

Barack Obama said he has asked Attorney General Eric Holder to pay attention to possible price speculation. It seems that the President doesn't even believe that speculators are responsible for the price increase but seemed to want to give some political cover to his party. Do you think the president of the United States going into re-election wants gas prices to go up higher? Obama asked! So why not start a phony investigation to offset the blame? Yes that is the ticket.

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