By FX Empire.com
Light Sweet Crude continued its consolidation for the week as the market simply cannot break out of the $94 to $105 range. The range even had tightened a bit as the $98 level was also supportive as well. The resulting candle is a hammer of sorts, but the range has been so strong, it can’t be trusted by itself.
The oil markets continue to struggle with the Iranian problems as the regime is now threatening to cut off its oil from Europe in a preemptive strike of sorts. The European Union is set to put in place an embargo of Iranian oil in 6 months, and a sudden cutoff could cause serious issues for Europe as many of the countries that buy Iranian oil are the weakest. The move could trigger a spike in price.
The fact that the demand is so low hasn’t really been paid attention to by most traders, and it looks as if the market is focusing solely on the drama coming out of Tehran. The market is certainly tight at the moment, and it looks as if many players simply are not being active. The political risks need to be taken care of if we are to finally move again.
The range that we are watching is the aforementioned $105 to $94 level, and we will have to see a break and close on the weekly chart outside of the range in order to place a new position. The risks are simply far too great right now, and this is probably why the lack of demand hasn’t really beaten the price down more than it has. With this in mind, we prefer waiting as this market can turn on a dime, and there are plenty of reasons to think that the rhetoric in the Persian Gulf will continue. In a related note, the Israelis are now openly talking about their ability to destroy the nuclear facilities that Iran seems so desperate to have. If this strike ever happens, the oil markets will go absolutely parabolic.
Oil Forecast for the Week of February 6, 2012, Technical Analysis
Originally posted here
