Oil Climbs, Europe Back In Focus

Oil (NYSEARCA:USO) climbed to $103/bbl. as economic pressure from Europe and the United States continued to build on Iran.

ETFs in the energy arena (NYSEARCA:OIL) (NYSEARCA:USL) reflected escalating tensions in the Persian Gulf with the oil complex adding approximately 4% in the last two sessions.  Further upward price pressure came from today’s report from the American Petroleum Institute (API) which indicated that for the week ended December 30th, inventories declined 4.4 million barrels.

The European Union upped pressure on Iran as the Union agreed to an embargo of oil purchases from Iran, which, along with financial actions in the United States, will serve to cripple Iran’s oil dependent economy before an upcoming national election.

Iran is the world’s third largest exporter of oil and 60% of its economy is oil based.  The European region is the second largest consumer of Iranian oil after China and so this embargo could have some real impact on Tehran and its nuclear ambitions.  Europe is largely dependent on oil imports and major European ETFs declined sharply on the news of escalating tensions with Vanguard’s European Vipers Fund (NYSEARCA:VGK) dropping 1.2% and iShares Europe 350 (NYSEARCA:IEV) shedding 1.03%.

At home U.S. stocks were quiet with major indexes near flat line and gold advancing +0.77%.

Yesterday’s rally strengthened the technical picture with the S&P 500 moving solidly above the widely watched 200 day moving average and registering a “Triple Top Breakout” in point and figure charting methodology.



In the chart above, we can see how the breakout formed yesterday and the index is solidly above the blue bullish support line.  The Price Objective is now 1430 and next (and last) significant resistance is at 1290 which corresponds to significant highs in August and November.  A breakout here would open the door to further price rises towards the 1340 level.

Today brings the ADP Employment report along with weekly jobs claims and ISM Non Manufacturing reports, all leading to Friday’s grand finale with the Non Farm Payrolls and Unemployment reports.

Disclaimer:  Wall Street Sector Selector actively trades a wide range of exchange traded funds (ETFs) and positions can change at any time.  Wall Street Sector Selector has long positions in USO.