Light Sweet Crude rose during the Tuesday session as the Americans got their turn to finally react to all of the drama going on in the Middle East. With the holiday over, the US-based traders piled into the market - decidedly pushing the price well clear of the $105 barrier.
The recent embargo threats by the Iranians as well as the trade sanctions on the Iranians by the Western powers have escalated into the present situation. The oil markets are not necessarily following fundamentals of supply and demand at this point, rather acting in accordance to whatever headline is currently dominating the news flow. The fact is that there is more than enough crude sitting at Cushing presently, but the market is anticipating shortages of other grades around the world at this point.
The break of the $105 level does signify another leg up in this market, and although the price is well over anything approaching fair value, the fact is that the demand by speculators is still there. The recent jitters will only give way once the Iranian situation calms down. By the looks of things, this could be a while before it happens as neither side looks ready to back down. Also, there is open talk about the possibility of an Israeli strike on nuclear facilities in Iran, and if this happens we could see a spike in pricing.
The $105 level should now act as support going forward, and as long as the Iranians remain defiant, we are not willing to sell this rally at all. In fact, this has quickly become a buy on the dips market for us, and we will continue to do so until we reach the next obvious resistance area in the form of the $115 level.
The trend has been overly strong, and as long as we are in the present situation, it is hard to imagine anything changing. The moves have been far too strong, and although we don't agree with the demand part of the equation being suggested at this point - we cannot fight the market.
Oil Forecast February 22, 2012, Technical Analysis
Crude Oil Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3