Netanyahu sparks oil rally with Iran comments

Michael McKenna

Head of Editorial Content, Saxo Bank

Crude oil is trading with what Saxo Bank head of commodity strategy Ole Hansen terms a non-fundamental premium in the wake of Israeli prime minister Benjamin Netanyahu's forceful condemnation of Iran ahead of the US' May 12 deadline to extend the Iranian nuclear deal.

Netanyahu's claims are based on documents relating to a 1999-2003 operation in Iran that, while it falls outside the parameters of the current deal, allegedly demonstrates that Tehran is acting in bad faith with regard to its nuclear programme.

On the fundamentals front, meanwhile, Hansen reports that the latest Energy Information Administration data show US oil production having risen by 260,000 barrels/day in February to a total of 10.26 million b/d and 11.5m b/d forecasted for year-end.

Beyond crude, Hansen reports that gold, silver, and copper are on the defensive with XAUUSD potentially heading for a test of support at $1,300-1,305/oz; in Saxo technical analyst Kim Cramer Larsson's view, gold prices are likely to bounce from support at these levels.

Behind the weakness in gold is the dollar's continued rally, which Saxo Bank head of forex strategy John Hardy says remains in full effect. Looking at the EURUSD chart, both Hardy and Larsson feel that the pair is likely headed for a test of the 200-day moving average just above 1.20, with Hardy stating that failure here could see the euro drop down to 1.1586.
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Also of note in the FX space is kiwi, which in Hardy's view could react interestingly to the Q1 unemployment data slated for release at 22:45 GMT today.

In stocks, Larsson says that he sees the S&P 500 as "struggling to gain momentum" with strong resistance at both the 2,800 and 2,717 levels; on the downside, adds Larsson, the 200-day moving average at 2,600 "is crucial".

Saxo Bank head of equity strategy Peter Garnry reports that investors appear to be placing more focus on macro data and rates than on the relatively strong earnings season with the latest Apple release in focus after today's New York session.

"AAPL is down 10% from its peak on projections of weak demand from key suppliers" notes Garnry. "However, IDC forecasts a 31% gain in iPhone sales in Q2". 

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