On Thursday, crude oil gained 0.71% and climbed to $103.29 (an intraday high) as investors sought bargains after sharp losses in the previous days. Despite easing political worries about Iran and an improving supply picture, light crude rose 58 cents (compared with the Wednesday‘s closing price). It is its first day of gains following five straight sessions of losses.
Yesterday, Iran's new government began its first talks on Teheran’s nuclear program with the United States and five other world powers. It was a very uncommon meeting between top officials of the United States and Iran, which have been estranged since Iran's 1979 Islamic Revolution that toppled the U.S.-backed Shah. It’s worth mentioning that this was the first encounter between a U.S. secretary of state and an Iranian foreign minister since May 2007.
Iranians are hoping to see relief from the painful U.S., European Union and U.N. sanctions for refusing to suspend its uranium enrichment program. Because of these sanctions, Iranian oil exports have fallen by around 60% in the past two years and now Iran is earning around $100 million from oil sales a day as opposed to $250 million two years ago.
Having discussed this piece of data, let’s focus on the technical changes in the crude oil market. Yesterday, the buyers managed to hold the monthly low at $102.20 per barrel, which is a bullish sign. This positive event resulted in a pullback to the previously-broken rising medium-term support line. In spite of earlier growth, this resistance line stopped further increases and the price of crude oil slipped below it one more time. Please note that the breakdown is still unconfirmed and light crude remains slightly above the September low. This has some bullish implications for the very short-term picture, but they are not strong just yet.
To summarize: the situation hasn’t changed much and light crude remains slightly above a strong support zone based on the August low and the 38.2% Fibonacci retracement. Therefore, we will see either a breakout or a breakdown in the near term. If the breakdown below this support zone is confirmed, we will likely suggest opening short positions. On the other hand, if we see further improvement and a confirmed breakout above the previously-broken rising medium-term support line, we will consider opening long positions. The jury is still out on this one.
Very short-term outlook: bearish
Short-term outlook: mixed
Medium-term outlook: bullish
Long-term outlook: bullish
Trading position (short-term): we do not suggest opening short positions at the moment. Although the situation is still bearish on a very short-term basis, the trade looks risky because of the strong support zone. We do not suggest opening long positions either, because there has been no breakout above the medium-term support line and the price of crude oil may test the strength of the previously mentioned strong.
Thank you,
Nadia Simmons
