This Is Not a Technical Bounce
I don’t think this is just a technical bounce either because the low at $62.14 isn’t coming from any strong technical region. It looks like headline buying, which supports my notion that the mere mention of talks between the United States and Iran, military activity in the region, or even the presence of additional US naval ships in the area is enough to attract buyers and encourage weak shorts to aggressively cover their positions.
I don’t think it was a value buy either because the value zone is right around the $60.83 to $59.59 area. So yes, I believe we’re looking at a fresh round of war premium buying.
Stability Over Momentum
We’ve seen the buying on the dip, but we haven’t seen any key technical resistance levels overcome, so the fresh buying is just providing stability to the market. This is helping to keep volatility down and allowing traders to assess the price action at a much slower pace instead of during a panic buying situation.
Iran Talks Are Driving the Fundamental Story
Fundamentally, the talks between the US and Iran are the primary driver. Yes, we saw a brief sell-off last Thursday on demand concerns and worries about oversupply, and we may have seen some lightening of the war premium, but the market has absorbed that potentially bearish news and is back on track with the US and Iran relationship back at the forefront.
According to numerous news services, the two countries are scheduled to hold a second round of talks in Geneva today over Tehran’s nuclear program. Reuters suggests there is a little optimism in the air ahead of this meeting after President Trump said that Washington could make a deal with Tehran over the next month. Furthermore, there are reports that Iran’s foreign minister met with the head of the International Atomic Energy Agency, the UN nuclear watchdog, on Monday.
