Crude oil futures are down in early trade, with the August contract sliding under $68 a barrel after the World Bank predicted the global recession will be deeper than expected, contracting 2.9 percent this year.
MF Global Research Analyst Ed Meir said he believes the deterioration in the Iranian situation should keep keep prices close to the $70 area, and prevent a sharper sell-off. From his morning notes:
“We wrote in previous commentary that we expect the next evolution in Iranian opposition tactics to center around launching national strikes; from what we have been reading thus far, a number of work actions are starting to spring up, although they have yet to completely blanket the country. As examples, it was reported that gasoline supplies in Tehran are in short supply, and that workers at the main car company have also walked out. In addition, there are reports that several shops in the bazaars have locked down in protest, while universities are shut down. Oil workers have yet to walk out, but if they do, such an announcement could ignite the oil markets. For this reason, we would not want to get too short here, at least until there is more clarity with what the opposition may do next.
Our technicals point to a far different picture, as many of the short-term upchannels have now been breached in the wake of last Friday’s sell-off, suggesting further weakness ahead. However, we suspect it will be the fundamentals, specifically the Iranian situation, that potentially could exert more influence on prices at this stage than the charts will.”
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