Crude Oil Futures Drop On Supply, Despite Iraq Tension
MrTopStep | Aug 15, 2014 01:48AM ET
After spending since August 3 in a range between roughly $96.50 and $98.50, Crude Oil futures dropped by $2 a barrel today in heavy trading. Both the news from Iraq and basic supply and demand were contibuting factors
The drop came in spite of the resignation of Nouri al-Maliki, Iraq’s prime minister for the past eight years, after the withdrawal of support by not only the US but his staunch ally, Iran. UN-backed Haider-al-Abadi, a member of the same political party, will serve as interim PM. Meanwhile, ISIS continues to be a threat, the US is prepared to continue airstrikes, and the UN has declared the situation a “Level 3 Emergency,” which authorizes the delivery of increased support for refugees.
One positive development was the escape of 45,000 Yazidis from the remote desert mountaintop where they had been trapped by ISIS fighters. Another factor boosting the market was France’s promise of military aid to Kurdish fighters.
The major factor however was the arrival of solid numbers showing that world oil supplies will not be affected by any of the unrest in Iraq or elsewhere. Increased US production has given a boost to global production. At the same time, demand for oil worldwide has dropped due to increased use of renewables and natural gas as well as the end of summer.
Technically, the chart above shows the potential for further downside before the market finds solid support from which to rebound. The market has now made a 61.8% retracement of its rise since the low of early January. It now stands at prices we last saw in April.
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