Energy Futures Tumble Overnight

On November 25, 2013 by TradingDesk

A deal to limit Iran’s nuclear enrichment for 6 months, in exchange for roughly $7 billion in relief from economic sanctions sent energy futures tumbling overnight. Although the deal does not allow for an increased quota of oil exports, relaxed insurance restrictions on export vessels is expected to allow Iran to meet its current 1 million barrel/day maximum, a net increase of approximately 300,000 bpd.

The news sent both RBOB and ULSD futures 7 cents lower at one point, although those losses have been trimmed to 3-5 cents currently as markets try to assess if this agreement to attempt to make an agreement will actually have a tangible impact on global supply. ULSD values have bounced 2.5 cents after hitting the 200 day MA support layer, setting up the first key test to the downside after last week’s strong performance.

Investors piled back into Brent futures a week ago, and appeared to benefit as the contract rallied from $106 to $111 during the week. The movement of fund money in the next week may send a strong signal as to the market’s true perception of what is being touted as a major breakthrough in diplomacy after years of economic sanctions on the country that for many years was the 2nd largest OPEC producer.

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