Oil Ends Lower Despite Iran Rejecting U.S. Proposal

Recap: The crude oil market posted an inside trading day on Thursday and ended the session in negative territory even after the market reversed course on a Wall Street Journal report stating that Iran rejected the U.S. proposal and that Saudi Arabia and Kuwait lifted its restriction on U.S. military access to bases and airspace. In overnight trading, the market traded lower on renewed hopes for a U.S.-Iran peace deal that could bring a gradual reopening of the Strait of Hormuz. The U.S. and Iran were moving towards a limited, temporary agreement to halt their war. The oil market traded back below the $90.00 level and posted a low of $89.85 early in the morning. The market later settled in a sideways trading range as traders awaited for developments on whether Iran would agree to the U.S. proposal. There was a report from Saudi Arabia’s Al Arabiya news channel that said understandings had been reached to ease the U.S. blockade in exchange for a gradual reopening of the Strait of Hormuz, and another by Israel’s Channel 12 that said Iran had agreed to transfer its stockpile of 60% enriched uranium to a third country. However, the market later bounced off its low and retraced its losses on a Wall Street Journal report of Iran rejecting the U.S. deal as unrealistic. The crude market rallied to a high of $97.46 in afternoon trading. The June WTI contract settled down 27 cents at $94.81 and the July Brent contract settled down $1.21 at $100.06. The product markets ended in mixed territory, with the heating oil market settling up 3.1 cents at $3.8166 and the RB market settling down 33 points at $3.4560.

Technical Analysis: The oil market is seen remaining in its recent trading range as it holds support at its lows amid the expectations that the standoff in the Strait of Hormuz will continue after Iran said it would not allow the U.S. to reopen the waterway, while the Trump administration said it was looking to restart its operation to guide commercial ships through the Strait of Hormuz and Saudi Arabia and Kuwait lifted restrictions on U.S. military access to bases. The crude market is seen finding support at $89.85, $88.66, $87.64, $85.50, $85.45, $80.56, $78.97 and $73.56. Meanwhile, resistance is seen at $96.48, $97.17, $99.80, $102.42, $102.70, $105.48, $107.46 and $110.93.

Fundamental News: Bloomberg reported that there is uncertainty whether there will be enough jet fuel in Europe ahead of the summer travel season. Among the uncertainties are how quickly and fully the Strait of Hormuz will reopen, and, in the meantime, to what extent Europe can secure replacement supplies. According to Energy Aspects, if the waterway remains largely shut, the region’s stockpiles of jet fuel and kerosene stand to deplete at a rate of 230,000 bpd this quarter, which is about double Italy’s entire demand.

According to traders, market experts and Reuters analysis of exchange data, a series of well-timed market bets on falling oil prices totaling as much as $7 billion during March and April spread across multiple exchanges and types of fuel and derivatives just before major Iranian policy announcements by U.S. President Donald Trump. The size exceeds previously reported bets amounting to $2.6 billion, which have already prompted the U.S. administration to warn staff against using nonpublic information for financial benefit. The U.S. Commodity Futures Trading Commission is investigating, although the CFTC has yet to officially confirm a probe is underway.

U.S. Energy Secretary, Chris Wright, said that Iran appears to have cut back oil production by 400,000 bpd and is likely to reduce it more as its storage units fill. A U.S. naval blockade of Iranian ports has cut Tehran’s oil exports, stranding a growing stockpile of crude on tankers as Iranian storage ‌sites run out of space. Analytics firm Vortexa said just a handful of carriers carrying Iranian crude have left the Gulf of Oman between April 13^th and 25^th. That’s down over 80% from a comparable period in March, when Iran exported 23.4 million barrels.

Early Market Call – as of 8:35 AM EDT

WTI – June $94.89, down $2.77

RBOB – June $3.4425, down 7.49 cents

HO – June $3.8477, down 8.24 cents

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