Be Careful Of A Super-Spike In Oil, Cautions Terranova.

U.S. crude futures settled at $66.02, up only 13 cents on Friday despite growing geo-political tension around Iran's nuclear program.

On Friday President Obama and other Western leaders accused Iran of building a secret nuclear fuel plant and demanded Tehran immediately halt what they called a "direct challenge" to the international community.

The President went on to say the United States preferred diplomacy in dealing with Iran over its nuclear program, but would consider imposing "sanctions that bite" if the diplomatic track did not work.

Iran acknowledged the facility's existence for the first time in a letter Monday to the Vienna-based IAEA contending, "Iran's activities with respect to the peaceful use of nuclear technology are completely within the framework of IAEA rules and under its supervision."

In the wake of rising tension, how should you trade oil?

Short term oil had every reason to move higher on Friday and it didn’t, says Joe Terranova. Ontop of Iran the dollar was weaker and Goldman reiterated its call for $85 oil. But the price barely budged.

However, I would not short oil, because if the rhetoric increases we could see a super-spike in the price of crude. I would be watchful.

However, right now I'm more concerned that from a technical perspective, oil looks a little broken.

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