Crude prices declined yesterday as Japanese refining capacity remained largely offline in the aftermath of the Tohoku earthquake and subsequent tsunami, but the makings of a rebound appear to be emerging. Tensions in the Middle East threaten to jump back into the forefront as Gulf Cooperation Council (GCC) troops begin putting down unrest in Bahrain, where mostly Shiite protesters (allegedly egged on by Iran) are pitted against a Sunni government.
The outcome of the situation is critical in that Bahrain is a microcosm of what could happen in neighboring Saudi Arabia – the world’s largest oil exporter. The nascent Saudi protest movement is centered on the oil-rich and Shiite-dominated regions along the Persian Gulf and their qualms with the regime closely mirror those in Bahrain. Furthermore, the GCC force is dominated by Saudi forces, hinting that whatever happens in the island nation can be used as a close approximation for what is to be expected in the Kingdom.
Upward pressure may also emerge following the release of US Department of Energy inventory figures, which are expected to show stockpiles grew at a slower pace in the five days through March 11 than in the preceding week. Meanwhile, the situation in Japan remains highly fluid and the recent moderation in news flow can be interrupted at a moment’s notice, threatening another bout of knee-jerk volatility.
Prices put in a bullish Dragonfly Doji candlestick above support at $96.63, a level reinforced by the bottom of a falling channel set from the swing top set earlier this month. A rebound initially targets the $100/barrel figure. Alternatively, renewed selling through immediate support exposes $94.49.
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