Oil Update – Longer Term Story Seems Intact

Posted by Jack Crooks - Black Swan Capital

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BlackSwanOil Daily [last 100.46]: The rally in oil prices, which I still believe is a correction in the longer term downtrend, has carried further than I expected; however, technically the case can be made that key resistance comes in at 104.21…i.e. at that level it would seem that clearly something fundamental has changed.  The longer term rising supply story seems intact given the still questionable global recovery; forecasts of increased energy production in the US; and the Iran story

An interim accord easing restrictions on insurance for Iran’s oil shipments and freeing up cash held outside the country in return for a suspension of nuclear work went into effect last month. Under the agreement, six buyers permitted under U.S. sanctions to take Iranian crude don’t have to cut imports to avoid penalties.

Iran had an estimated 30 million barrels of crude held on tankers at the end of January, including 6 million barrels in vessels off China’s coast, according to the report. Total production rose by 30,000 barrels to 2.78 million last month, as cold winter weather in Iran boosted domestic fuel use.

The stylized target on this move carries to 101.74-84 before the downtrend resumes.  I realize we are taking major heat on DTO [short oil etf], but let’s be a bit more patient.   

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Jack Crooks

Black Swan Capital