LPL Financial Economist: Iran Deal Could Be Good News For Oil Prices

Benzinga recently had a chance to speak with John Canally, Senior Vice President and Economist at LPL Financial, about the current state of the U.S. economy following the disappointing March jobs report.
Among the topics Canally covered was his outlook for crude oil prices.
Is the bottom in?
WTI crude oil prices have traded in the upper $40 to lower $50 range for the past several months, prompting many analysts to declare that the drop in oil prices is over.
Shares of the United States Oil Fund ETF USO are down more than 50 percent in the past year, but have been mostly range-bound between $16 and $20 for three months now.
Benzinga asked Canally if he believes that oil has already established its bottom. Canally pointed out that each of the last six or seven times oil prices have declined as much as they have in the past year, it has taken two to three months for oil to set a solid bottom.
“The initial bottom [this time] was hit in late January, and we’re here in the second week of April, so you’re past that two-month period. If you look at a chart, it does look technically like oil has found some support here,” Canally added.
A word of caution
Canally cautioned that crude oil’s bottoming process doesn’t necessarily mean that it’s time to rush in and buy oil. “We could be in for a U-shaped recovery where oil bounces between $50 and $60 for a while before resuming an upward trend.”
Potential wildcard
Canally also noted that a geopolitical event, such as the Iran nuclear talks, could be a potential wildcard when it comes to oil prices. While intuition suggests that a deal that involved bringing Iranian oil back on the global market would hurt oil prices, Canally explained that it might not be that simple. “An Iran deal could be what sparks the oil rally when the uncertainty is removed from the market.”