It has been quite the move in the last two weeks. Especially after crude oil lulled everyone to sleep for about three months, even though the tension in the Middle East (particularly Iran) grew slowly and steadily.
Well, that tension is still building as Israel leans towards aggression, Iran stands its ground, and the outside powers voice their disapproval of potential military action; the US and Europe are watching their sanctions dig deep and the Eastern powers of Russia and China don’t want anyone meddling in their Mid-East relationships.
At the same time, there are some supply concerns from Iran, South Sudan, Yemen and Syria. In Iran’s case, part of the disruption came directly from European and US sanctions; the other part was voluntary as Iran preempted the shipment of crude to the UK and France by cutting off its exports immediately. The geopolitical turmoil in the other nations has created supply risks as well.
Based on the above plus technical reasons, I had been expecting a break higher for crude oil. Members of myCommodities Essential letter have been rewarded for their patience before crude oil’s sideways movement resolved itself.
Even though I believe there are very many risks that the price of oil could collapse as we move further into 2012, as I discussed in an issue of Commodities Essential back in mid-January and again more recently, I still think crude oil has some room to run a bit higher still on the current drivers and market sentiment.