Iraq's sudden fall into the hands of extremists has the market talking about extremes in oil prices. Extreme may be too strong a word, but there is slightly more bullish pressure than there was around at the time of the last oil crisis.
Developments in Ukraine and the annexation of Crimea had the potential to effect oil and energy supplies in Europe but failed to do so. While the Ukraine crisis accelerated the rally in NYMEX oil that started in the week of January 18, 2014, it was a short-term rally in the environment of a slow longer-term uptrend. The current Iraq-driven rally has a similar nature but is starting from a higher base.
Trend line A on the weekly NYMEX oil chart shows an uptrend starting June 2012. This trend line connects the lows in November 2012 and April 2013. This is the underlying secular trend, located within the context of well-defined trading bands.
The weekly NYMEX oil chart shows four levels of support and resistance that define the trading bands: $78, $88, $98 and $110.