Will Middle East Tensions be Enough to Prop up Oil Prices?

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After a trading week’s worth of declines, oil prices are finally steadying, helped along by bargain hunters and an escalation of Middle East tensions, most recently centered in Lebanon and Syria, but also now in Kuwait. Improving economic news from the U.S. and the Eurozone are also providing some price support, as combined they have revived investors’ hopes that the worst of the global economic slide might soon be over. London-traded Brent crude oil was trading higher at $109.53, while NYMEX-traded West Texas Intermediate crude was trading up at $88.84, slipping just a few pips from an earlier high.

The violence in Lebanon has intensified over the past month, leaving some analysts to believe that the Syrian violence and sectarian clashes have spilled across the border and intensified. In Kuwait, a geopolitical protest rally ended with more than a hundred casualties, and tensions are likely to escalate. Kuwait produces 2.9 million barrels of oil per day, and exports about 2.1 million and the country is home to the globe’s sixth largest oil reserve.

Analysts believe, however, that oil prices could drop over the next few weeks, despite price supports from the Middle East, with some expecting WTI to trade between $80 and $85 a barrel and Brent crude to slide to about $105 per barrel. Expectations of higher oil stock piles in the U.S. are also weighing on the outlook, and if realized will have been the third straight weekly rise. The Energy Information Agency will release its weekly report on U.S. inventories tomorrow.

On OpenBook, sentiment among traders for WTI oil is overwhelmingly bullish, with 97% of traders buying against only 3% selling. OpenBook trader S0116692 from Norway placed an order to buy when the price falls to $87.90 and recently gained 5.91% on a long position. The trader’s 3.2% allocation in oil has provided the highest gains in the portfolio at 14.5% over the past six months, while a CAD/JPY allocation of 2.2% earned 13.4% in the same period. As a major North American producer of oil, the Canadian Dollar is highly susceptible to movements in oil prices. The trader’s realized equity over the past quarter was 83.5%, an 27.3% for the last month.

 

Trader sumforex from Saudi Arabia has a number of short positions in oil currently open, and each of them is currently showing a gain. The trader, who is relatively new to OpenBook, has a 58.9% allocation in oil which has shown a gain of 22.6% over the past month; his realized equity since he started trading is 18.8%. As of this writing, the trader has 29 followers and 15 copiers.

Copyright 2012 eToro Blog

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