Cannon Trading Futures Blog: Daily Support and Resistance Levels

DJ OIL FUTURES: Crude Up; Tensions Over Iran Up Risk Premium(DJ)
  By David Elliott
  Of DOW JONES NEWSWIRES
 
  LONDON (Dow Jones)--Crude oil futures were trading higher
Wednesday morning in London as the market factored in further risk
premium on continued tensions between Iran and both the U.K. and
U.S.
  Traders said conditions remained jittery after prices spiked
around 8% late Tuesday on unconfirmed speculation, later denied by
the U.S. government, that Iran had attacked a U.S. vessel in the
Persian Gulf.
  Most of the gains have since been pared but a continued stalemate
over the 15 U.K. sailors detained by Iran, along with further
strength for the gasoline market, is expected to push prices
higher again.
  At 1111 GMT, the front-month May Brent contract on London's ICE
futures exchange was up $1.21 at $65.82 a barrel.
  The front-month May contract on the New York Mercantile Exchange
was trading $1.28 higher at $64.20 a barrel.
  ICE's gasoil contract for April delivery was up $15.50 at $570.25
a metric ton, while Nymex RBOB gasoline for April delivery was up
185 points at 209.15 cents a gallon.
  Concern military action against Iran could interrupt the supply of
crude oil from the Persian Gulf remains the main focus of the market
and, although Tuesday's speculation proved unfounded, the sharp
price reaction has forced traders to take a more cautious
approach.
  Up until then most market participants felt the release of the 15
U.K. naval personnel seized by Iran in the Persian Gulf would be
resolved through diplomatic means but the growing concentration of
naval vessels from the U.S. and other western regions in the Persian
Gulf has put the market on edge.
  Frederick Lasserre, an analyst at SG Securities in Paris, said the
market's sharp reaction shows the potential for military action
hadn't been factored into prices at the $62 a barrel level.
  As a result, he sees the market adopting a further risk premium of
$2 to $3 a barrel even if Iran releases the sailors, as tension over
Iran's disputed uranium enrichment program continues.
  The U.K. government reiterated Wednesday that the sailors were
within Iraqi waters when they were detained, while Iran maintains
they were within Iranian waters and it was justified in its
actions.
  But amid the political tension, there are suggestions a risk
premium is unjustified.
  "People are saying there is a worry over an interruption to supply
but we went through two Gulf wars when oil supply wasn't badly
affected," said a London-based broker. "Iran isn't going to want
to risk the flow of its main export."
  Further bolstering underlying support for the crude oil market is
gasoline.
  Strong gains in this market have dragged crude prices higher over
the last few weeks and show little sign of slowing their upward
trajectory amid extended refinery closures.
  This has been exacerbated by a strike by port workers in
Marseille, France, which has forced Total, Esso and Ineos to
reduce crude runs in their southern France refineries.
  And another expected slide in U.S. gasoline stocks in the weekly
Department of Energy inventory report, due 1430 GMT, would add
further support for gasoline prices.
  Analysts surveyed by Dow Jones Newswires expect gasoline stocks to
fall by 1.8 million barrels, distillates by 800,000 barrels crude
stocks are seen rising by 1.1 million barrels.
  These bullish factors have prompted analysts at Lehman Brothers
predict the current upward trend for oil prices continues in the
coming months as focus shifts to the U.S. driving season.
  They attribute the 24% rally in prices since mid-January to robust
demand, continued supply pressure from OPEC and recent geopolitical
events associated with Iran.
  "We believe these factors put further pressure on an already tight
oil market," they said.
 
  -By David Elliott, Dow Jones Newswires;

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