Commodities | Apr 05 2012
The situation in Iran looks to be cooling with Obama inches away from imposing additional sanctions. At the moment we feel that the extension of the time line granted to Iran as a result of it allowing IAEA representatives to inspect their facilities is slowly coming to an end. We wait for the Agency to report. In the meantime the US has stepped up its plans to intensify sanctions. The key here is how much “push” will the US give before Iran bites back.
An interesting twist to the developments has to do with Saudi Arabia and its ability to increase production. The last comment we heard was that they had 25% spare capacity. This is not to be. Saudi Arabia managed to placate market concerns and increase production, during the earlier Iran conflict, Iraq, Kuwait and more recently Libya. When we lost 1.5 million barrels as a result of Libya coming off line the Saudis filled the gap. However, with Iran exporting 2.2 million barrels a day the question is whether or not this can be made up. If the situation in Iran deteriorated further then it is questionable that the Saudis’ can make up the gap in this lost product and the US knows this. After all, why has it decided to provide exclusions to some countries?
Although, the news across the wires is not as frequent as before, this mess continues to smoulder and by no stretch of the imagination is it over. This should keep the Middle Eastern premium alive and kicking. So keep an eye on dips.
Chart Point
The [WTI] range is US108.40 to US102.50. US 104.50 the market is flirting with at the moment. Momentum indicators are mixed however we need to see US102.50 hold to conclude that the range is a “true range”.
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