Articles
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How the New Iranian Nuclear Deal Will Impact Oil
This week, reports emerged that a draft deal on Iran’s nuclear program would be reviewed by the Western negotiators. Crude oil prices plummeted – West Texas Intermediate (WTI) closed down 4.2%, at $56.96 a barrel, the lowest since April 22.
The concern spurring the decline is that an agreement would lift the Western sanctions and allow Iranian oil to flood into the market, propelling prices down.
But there’s only one problem.
There was no genuine truth to the rumor, as confirmed by actual negotiation participants last evening.
Now, I am not somebody who falls into line with each conspiracy theory on market machinations that comes down the pike. But this sequence of events was tailor-made for one.
So let’s set the record straight on the negotiations.
Here’s my take on what’s really going on…
How the Shorts Will Profit
The market will be light on volume today, closed tomorrow and over the weekend, and subject to the phased-in activity resulting from a long holiday weekend on Monday.
This July 4 weekend just happens to be perfect for running what we used to call a “narrow-cover short.” As with all shorts, the intention is to profit if a price (or value) declines. However, this particular version is meant to last no more than five trading sessions.
Such shorts usually target narrower returns, betting on a quick push down that is not sustainable, given overall market dynamics… like a well-placed if mistaken (and I’m giving the benefit of the doubt here) “news” release.
By that time, the global market is on the other side of a hastily called (as well as procedurally suspect) referendum in Greece, and other matters will take over. The “super short” shorts will be covered, and a few folks will pocket some nice change.
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