Energy Futures Rallying On Iranian Naval Exercises

On December 26, 2012 by TradingDesk

After failing to secure any momentum to the downside Friday and Monday, energy futures are rallying today on news that Iran would begin a week’s worth of naval exercises in the Straits of Hormuz. While at this point it seems unlikely that the move will cause any actual supply disruptions, it is another reminder of the vulnerabilities associated with having nearly 1/5th of the world’s traded oil travel through a 20-mile wide piece of water.

While budget discussions in Washington continue to dominate the headlines, and much of the price action in equity and commodity markets, it should be noted that RBOB and HO bottomed out during the last week of 2011, before staging a 4 month rally that gained 97 and 55 cents respectively. While product prices remain range-bound for now, technical studies are moving into bullish territory, and seasonally we would expect prices to find a bottom sometime over the next month or two. $2.80 and $3.07 will provide the first major hurdles for gasoline and diesel futures to clear before any spring rally can begin in earnest.

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