Oil under short-term pressure

The cessation of hostilities between Israel and Hizbullah contributed to the decline.

By SETH FREEDMAN
September 4, 2006 07:20
1 minute read.
Oil under short-term pressure

oil barrels 88. (photo credit: )

 
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The oil price has fallen $10 a barrel, or 13 percent, since its peak of $78 on August 7. The cessation of hostilities between Israel and Hizbullah contributed to the decline, and - from a technical standpoint - it looks set to continue in the short term. Over the past three years, oil has been in a major uptrend, with the price rising from the mid-$20s to $68.75 at present. The bullish sentiment surrounding the commodity has taken somewhat of a hit over the past few weeks, with some analysts suggesting the end of the huge rally is now in sight. However, the threat of sanctions against Iran in connection to its nuclear program still abound, which means that there is a great deal of support for the oil price among investors, some of whom predict that if Iran turned off its oil supply, the price could spike above $100 per barrel. On the charts, it would appear that the bearish momentum of late could see the price test the $65 mark - where there is a lot of support on the charts - before its next rally. This would represent a decline of 6% in price from current levels, and appears to be the likeliest outcome over the coming sessions. Technical analysis is the study of trading based on previous performance, focusing exclusively on price movements rather than the fundamentals of the index/currency involved.

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