This drop in oil prices could be short

Futures went lower on news of a deal with Iran, but the country isn't the most reliable partner in the world.

By Benzinga Nov 25, 2013 12:52PM

Image: Oil drums (© Kevin Phillips/Digital Vision/age fotostock)By Matthew McCall


The news over the weekend regarding a nuclear deal with Iran sent oil futures lower on Sunday when electronic trading opened.


West Texas oil futures fell by 1 percent immediately as Brent crude, more sensitive to the Mideast, fell by over 2 percent.


The deal with Iran is only temporary and will initially last six months. When the deal is broken down it shows that the sanctions on Iran’s sales of oil are not included, suggesting the fall in oil may be short-term. Then there is the fact that Iran is not the most reliable partner to strike a deal with. The country has little to no credibility and what happens over the next six months is anyone’s guess.


That being said, this past weekend was a big step in the right direction as far as halting the Iranian’s efforts to towards a nuclear bomb. That is the reason for oil falling, it is the market anticipating that at some point the Iranian oil will come back online and the geopolitical tensions in the region will be lowered dramatically.


The United States Oil ETF (USO) tracks the daily changes in the spot price of light sweet crude as measured by the changes in the price of the near month futures contract. The ETF has been in a downtrend since topping out at a one-year high in early September. The 14 percent drop had been halted three weeks ago and the ETF began forming a basing pattern as it traded between $33.50 and $34.25.


The low of $33.45 hit earlier this month will be a key level to watch on trading Monday and the remainder of the holiday shortened week. If the support is not held it will send the ETF to a five-month low and could spur on more selling back on the technical analysis.


Another oil ETF to watch is the United States Brent Oil ETF (BNO), which closed at a one-month high on Friday and has been outperforming USO the last couple of months. Because of its close ties to the Mideast, BNO will likely be harder hit on the Iran news and could test the November low of $40.84 in the coming week if the selling continues.


Read more from Benzinga

0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

124
124 rated 1
279
279 rated 2
454
454 rated 3
606
606 rated 4
675
675 rated 5
690
690 rated 6
622
622 rated 7
453
453 rated 8
301
301 rated 9
111
111 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
BBBYBED BATH & BEYOND INC10
TWXTIME WARNER Inc10
COPCONOCOPHILLIPS9
HDHOME DEPOT Inc9
VZVERIZON COMMUNICATIONS9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.