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Why Isn’t Oil Surging On Mideast Tension?

Oil rose nearly 2 percent above $67 a barrel on Monday largely due to growing tensions in the Middle East.

True that’s an increase, but it’s hardly the type of move you might expect after Iran test-fired a missile that could hit Israel and U.S. bases in the Gulf region.

Considering the country is the second-largest oil producer in the Middle East, what gives?

Although uncertainty over supply from the Middle East generally drives prices higher, current tensions with Iran are no match for the fundamentals of global oil demand, writes the Wall Street Journal (Traders) want to see recovering economies and recovery of demand before they're willing to take crude much over $70.

"Oil markets have been watching this soap opera since (Iranian President Mahmoud) Ahmadinejad introduced himself to the world stage in 2005," analysts led by Stephen Schork said in a report. "Every time the U.S., France and the U.K. have attempted to take a hard line with Tehran, their efforts were deflected by the Russians and Chinese."

What's the trade?

In the short term oil probably heads lower, muses Addison Armstrong of Tradition Energy. I expect bearish inventory numbers will push the price to about $64.

You can find our entire interview with Addison Armstrong at the end of the Word On The Street video.


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