The oil market jumped right away on Monday, as we saw the market react to the latest barbs traded between the United States and Iran via the media. However, we have since dropped to turn things around.
WTI Crude Oil
The Light Sweet Crude Oil market jumped right off the bat as traders reacted to the somewhat hostile headlines coming out of the talks in Switzerland between the Americans and the Iranians. That being said, since then, the Iranians have been agreeable to the idea of nuclear inspectors, and that is a huge jump in the right direction.
All things being equal, this is a market that fell almost immediately, and now we find ourselves lower than we were on Friday. I think at this point in time, it's obvious that crude oil is trying to price in the idea of peace, and we have almost made a complete round trip from the war itself.
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Finding the Market Range
The market dropping down to $67 opens up the possibility of completely wiping all of those gains out, and I do think that eventually happens. Whether or not we go lower than that, I think that's a completely different question, and I do understand that there are some supply chain concerns still out there when it comes to crude oil, so I would expect some resiliency.
In fact, really, what I think we're doing is trying to find the range. So, the 200-day EMA may be the top for a while, and I think somewhere around $70 you'll have the short-term bottom, and possibly an area that a lot of options traders will be interested in.
With that being said, I do think that short-term rallies, extreme stretches to the upside, more likely than not get sold into at the first signs of trouble, as this is a market that should normalize soon.
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