February Crude Oil
The week started out strong with February Crude Oil futures spiking to $38.39 early during Monday’s session, but by the end of the day, the market was trading over 1% lower.
Prices jumped early in the session on new tension between Saudi Arabia and Iran. This was in reaction to events over the long holiday week-end where Saudi Arabia cut diplomatic ties with Iran after Ayatollah Ali Khamenei said Saudi Arabia would face “divine revenge” for executing a top Shite cleric, Sheikh Nimr, along with 46 others, many of whom were members of al-Qaida.
According to Reuters, Saudi Arabia said it will end all commercial ties with Iran in response to an attack on the Saudi Embassy in Tehran. Bahrain said it would also cut ties with Iran.
This news triggered a rally initially because traders thought it would lead to interruptions in supply especially since Iran is getting ready to boost production by up to 1 million barrels a day as sanctions imposed by the West on Iran could be lifted as early as this month.
Prices began to weaken, however, as traders saw no immediate threat to supply from the Middle East. In fact, the thought that the conflict between the two nations would lead to higher prices backfired as traders shifted their thoughts from bullish to bearish. By the end of the week, more investors were leaning on the short side of the market because a lingering conflict would lessen the chance that Iran and Saudi Arabia…