Recap: The crude market on Tuesday retraced some of Monday’s sharp losses as the market weighs the possibility of a de-escalation in U.S.-Iran tensions against the expectations that India will cut its purchases of Russian crude oil under a trade deal with the United States. The market remained pressured in overnight trading as the geopolitical risk eased amid the news that the U.S. and Iran are scheduled to resume nuclear talks on Friday in Turkey. The market traded mostly sideways before it posted a low of $61.12. However, the market bounced off its low and retraced some of its losses and traded back over the $63 level, with the U.S-India trade deal prompting some uncertainty in the market over Russian oil exports. The market rallied to a high of $63.74 in afternoon trading on the news that the U.S. military shot down an Iranian drone that approached the Abraham Lincoln aircraft carrier, prompting concerns that the talks aimed at de-escalating tensions could be disrupted. The market later erased some of its gains and settled in a sideways trading range. The March WTI contract ended the session up $1.07 at $63.21 and continued to trend higher in the post settlement period, posting a new high of $63.92. The April Brent contract settled up $1.03 at $67.33. The product markets also settled in positive territory, with the heating oil market settling up 4.95 cents at $2.4093 and the RB market settling up 4.65 cents at $1.8979.
Technical Analysis: The oil market will likely trade in a sideways trading range as the market is seen remaining in wait and see mode. The market will look to further developments on the expected resumption of talks between the U.S. and Iran over the Middle Eastern country’s nuclear program as well as the trilateral talks between the U.S., Russia and Ukraine in a bid to end Russia’s war in Ukraine scheduled for Wednesday and Thursday. The market will also look to any news regarding the impact of the U.S.-India trade deal on India’s imports of Russian crude oil. It should be noted that any impact to Russia’s exports to India may take some time as India has booked cargoes loading in February for March arrival. The crude market is seen finding support at $61.12, $60.66, $60.14, $59.52, $59.29, $58.96, $58.53, $58.32 and $57.48. Meanwhile, resistance is seen at $63.92, $64.43, $64.74, $66.11 and $66.48.
Fundamental News: A regional source said Iran is demanding that talks with the U.S. this week be held in Oman not Turkey, and that the scope be narrowed to two-way negotiations on nuclear issues only. Earlier, a regional official said the priority of talks between Iran and the United States this week in Istanbul is to avoid any conflict and de-escalate tensions between the two sides, adding a group of regional powers were also invited. The official said some of the countries invited to the talks at the foreign ministers’ level included Pakistan, Saudi Arabia, Qatar, Egypt, Oman, and the United Arab Emirates.
The Financial Times reported that Ukraine has agreed with Western partners that any persistent Russian violations of a future ceasefire agreement would trigger a coordinated military response from Europe and the United States. The report said the plan was discussed on several occasions in December and January between Ukrainian, European and American officials and would involve a multi-tiered response to any breaches of an agreed armistice by Russia.
Vortexa reported on Monday that crude oil stored on tankers that have been stationary for at least 7 days fell -6.2% w/w to 103.00 million bbl in the week ended January 30.
The director of the North Dakota Pipeline Authority said Monday that crude oil production in the state “was back to normal by the middle of last week” as milder weather had returned. During the last week of January, weather-related disruptions had resulted in daily production being reduced by 80,000 to 110,000 b/d. Meanwhile North Dakota’s Department of Mineral Resources reported North Dakota’s crude oil production in November averaged 1.19 million b/d, up 1.06% from October reported levels. Natural gas production in November though declined 0.64% from the prior month standing at 3.54 bcf/d.
Early Market Call – as of 8:55 AM EDT
WTI – Mar $63.05, down 85 cents
RBOB – Mar $1.9011, down 1.3 cents
HO – Mar $2.4111, down 2.74 cents
