Here's a look at the weekly chart. This gives us a better view of how this price action is playing out over the longer term.
Also remember, we have a strong fundamental reason for this price action -- the Iranian situation and lower stockpiles of oil and gasoline. In other words, fundamental and technical events have converged to run prices higher for now.
It's possible that when the Iranian situation is solved prices will make a pullback. When that happens, we'll have to see if the neckline provides support rather than resistance for prices.
Although the market has come off highs struck earlier this morning, analysts expect price increases to be sustained going into the weekend. "People are taking long positions (ahead of the weekend) as a precautionary move," said BNP Paribas analyst Harry Tchilinguirian. "If the situation doesn't get resolved quickly, momentum from the event will be maintained." But although the situation remains uncertain, the market is not betting on further sharp increases in price
"A lot of people are betting on resistance heading towards the 70 usd level," said Michael Davies, an analyst at Sucden, adding however that he still sees more risks to the upside. The US sought to allay fears the situation could escalate yesterday. "There is no reason for us to choose a confrontational path now," US Under-Secretary Of State Nicholas Burns told Congress
Traders taking long positions before the weekend indicates they are bullish. Essentially, these moves indicate traders think the news has a higher possibility of being bullish for the oil market. They purchase the contracts to take advantage of that possibility.
$70/bbl resistance makes sense. Round numbers usually provide technical support and resistance. Also, a move to $70 from recent lows will be an increase of 22% (assuming the recent low of around $57/bbl). And $70/bbl provided resistance in the 3rd quarter of 2005 and early 2006.