On Monday, all the remaining parties taking part in the Iranian nuclear deal met and unanimously decided to keep business relation
ships and trade with Iran in place, despite the US being strongly
against it and also preparing sanctions aiming to cut off Iranian oil sales. After the meeting, a statement from all participants including Britain, China, France, Germany, Russia and Iran was released, in which the members indicated they were willing to work towards creating new payment mechanisms in order
to continue the trade with Tehran. The new payment mechanism could be set in place in order to counter US sanctions but also for EU member states to make legitimate financial transactions with Iran in accordance with European Union law. It must be noted, some of the meeting’s participants but also market followers are doubtful as to if the new developments can take place and materialize due to the US significant influence around the world. Furthermore, European countries along with Russia and China send the message of being satisfied with the current Iran trade circumstances, regarding price levels, quantity, quality and transport of Oil to their countries. Not a single negative comment as per trading details was made from
any of the pre mentioned countries regarding Iran, which leaves us with the idea that Iran is a dependable oil producer and distributer, with a group of pleased customers backing it. Furthermore, the countries being involved in the meeting are of great significance not only due to their respected
populations but as of being a huge part of the global economy. This
equals, that Iran supplies’ a huge part of the Oil market with its
glut and could be a key player in business operations.
On the OPEC front, Saudi Arabia has ignored requests made from the US president to increase output, aiming for lower Oil prices. Moreover, Saudi Arabia and Russia are in very good business terms and are working together with the objective of stabilizing the market Oil supply and thus keeping prices at desired levels. The current price range is not desired from the US for various reasons. First is the huge oil supply they have and especially
from Shale Oil producers which they could bargain selling at lower
prices. Second is the fact that high Oil prices are seemingly a reason for higher inflation within the US which ultimately encourages frustration and raises worries within the US economic outlook. However, the disregard
of the Saudis could cause an upcoming retaliation act from the unpredictable US president which is not willing to see his country being put to the side. Yet, Oil prices have risen in the recent days and Saudi Arabia could be the most d
ominant Oil producer globally. Most significantly, Brent crude is
currently trading at a four-year high at $81. 40 per barrel which is near the November 2014 high of $81. 50 a barrel reached the previous day.
The increasing oil prices are arising simultaneously with emerging market currencies, such as India’s rupee, which are under pressure. The current situation implies Indian crude imports are more expensive
this year in rupee terms. According to Reuters, Indian imports could be reduced as the economic factors are much in favor of the seller and against them, leaving the huge oil importer to operate under their
saved oil resources until the prices retreat at lower levels.
Evidently the effect of the pending U.S. sanctions on Iranian oil exports could be worse than initially expected because the US must now face other countries which are in favor of Iran continuing its
business. International laws may collide and this could send prices to extraordinary levels. The US may be forced to adjust to
international oil needs, with a battle prior to that event
Oil prices rose higher in the previous days breaking both our $70.40 (R1) resistance level and the $71.24 (R2) resistance hurdle, both now turned to
support levels. However, today the commodity awaits the
API Crude Oil weekly figure to be released, with no forecast in place. We see the case for Crude oil to move with a bullish sentiment according to the fundamental news looming the market at the moment. If the bulls take over the Crude Oil market we could see it breaking the $72.56 (R1) resistance level and move even higher towards the $73.50 (R2) resistance area.
However, Crude Oil’s 1 hour chart is approaching the reading of 70 on the RSI indicator, which could be signaling an overcrowded long position.
If any evidence of over supply is released within the news, we may see a bearish sentiment overtake the commodity. In this case, Crude Oil could move downwards to the $71.24 (S1) support level and move even lower towards the $70.40 (S2) support barrier.