Image:http://danielpauldaniello.com/wpcontent/uploads/2013/07/SHOOTING_OILWELL.jpg

Key oil refinery ‘seized by rebels’–http://www.bbc.com/news/world-middle-east-27990478

Sunni militant group, ISIS (Islamic State in Iraq and the Levant) has not only taken over major cities in Iraq, such as Mosul, Kirkuk and Tikrit and terrorized the civilians, but also shook the world to the core that depends on it for oil production. The worst happened when the news arrived that a key oil refinery has been captured by the rebels (see the link above) and fears mounted that an uncontrollable oil price surge, which will severely pinch the consumers, is just round the corner. The easiest explanation for this theory is that if the supply is reduced/ disrupted then surely, the prices will gain.

But is it really that simple? Have the oil prices really surged so much during the Iraq crisis? Or is oil in a bull run already? Let’s find all the answers for these questions with the help of this chart:

Image: https://www.tradingview.com/e/

Technical Analysis: Enough to sooth your panicked nerves!

From the monthly price chart above, it can be easily seen that NYMEX Crude Oil is already in an “ascending triangle” which is a bull trend formation and the recent Iraq crisis has not made a significant impact on the oil prices. Post-2008 recession crash, oil prices have been slowly and steadily gaining on the upside and the momentum has been relatively unmarred by external events.

Technically, the oil prices are on a strong footing and a monthly close above $115 per barrel would only take the prices higher, towards $145 a barrel, which is near an all-time high. Oil is currently trading above the important Fibonacci retracement level of 61.8% and faces resistance in the price band of $ 115-120 a barrel. Only a monthly close below the Upward Sloping Support line (in the chart above) will puncture the sentiments of the bulls and lead to a bear-rampage. But till the time the support is respected, only long positions should be considered and shorting, even at higher levels, should be avoided as this is not a “sell on rise” rally.

It is definitely bad news for us consumers and we can only hope that Iraq issue be resolved soon (if it even affects, that is!) or a magical source of unlimited oil is discovered so that at least in the near term we could enjoy a less expensive oil. But now we surely know that we don’t have to give in to unwarranted fears owing to the tensions simmering in Iraq. The hot money is currently not worried and neither should we be.

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