Recap: The oil market ended the session lower on Thursday after reversing earlier gains amid reports of a draft U.S.-Iran deal. Early in the session, the market weighed the possibility of getting the U.S.-Iran peace talks on track against signals that Iran was hardening its stance on one of the main U.S. demands. In overnight trading, the market traded sideways amid reports that Pakistan stepped up its diplomatic efforts on Thursday to hasten the peace talks between the U.S. and Iran, as Tehran said it was reviewing Washington’s latest responses. On Wednesday, U.S. President Trump suggested he could wait a few days for “the right answers” from Tehran, while also noting the willingness to resume attacks on Iran. The crude market later in the morning traded higher and extended its gains to $4.40 as it posted a high of $102.66 after Iran’s Supreme Leader, Ayatollah Mojtaba Khamenei, issued a directive that the country’s near-weapons-grade uranium should not be sent abroad. The market was well supported by concerns that the order could complicate talks on ending the war. However, the crude market later erased its gains and breached its earlier lows as it sold off to a low of $95.76 ahead of the close on prospects for a U.S.-Iran deal. The July WTI contract settled down $1.91 at $96.35 and the July Brent contract settled down $2.44 at $102.58. The product markets ended the session in negative territory, with the June heating oil contract settling down 11.55 cents at $3.8316 and the RB market settling down 10.78 cents at $3.3796.
Technical Analysis: The crude market will remain headline driven as the market remains uncertain about the prospects for resolving the U.S.-Israeli conflict with Iran. As of Thursday afternoon, no peace deal had been reached, with Iran’s uranium enrichment and its control over the Strait of Hormuz remaining among the sticking points. While the market will trend lower on news of a deal, the losses will remain limited so long as the waterway remains mostly closed. The oil market is seen finding support at $95.76, $95.67, $95.12, $94.68, $93.42, $93.91, $92.84 followed by $90.25, $86.76 and $86.13. Meanwhile, resistance is seen at $102.66, $104.45, $104.86, $105.21, $109.24, $109.47, $110.93, $117.63 and $119.48.
Fundamental News: The head of the International Energy Agency said the start of peak summer fuel demand combined with the lack of new oil exports from the Middle East and depleting stocks could push the oil market into the “red zone” in July-August. He said the world entered the oil supply crisis caused by the Iran war with a surplus of oil, which helped to absorb the shock, but now stocks are eroding. He said it will take a lot of time to bring Middle East oil production and refining capacity back to pre-war levels and the recovery time will differ from country to country.
According to Goldman Sachs Group Inc., global stockpiles of crude oil and products are being drawn down at a record pace as the Iran war drags on, curtailing supplies. It said inventories fell by 8.7 million bpd so far this month, almost double the average pace since the conflict began. Crude inventories in the U.S., including the SPR, fell by 17.8 million barrels last week.
UBS raised its September oil price forecasts by $10/barrel on Thursday, projecting Brent crude at $105/barrel and U.S. West Texas Intermediate crude at $97/barrel.
A Bloomberg Intelligence survey showed that oil market participants are increasingly seeing crude capped near $100/barrel over the next year as demand is forced to slow to counter the supply losses from the war.
Sources stated that seven leading OPEC+ oil-producing countries will likely agree to a modest increase to their July output when they meet on June 7th. The monthly target set by seven core OPEC+ members is expected to be raised by about 188,000 bpd. All spoke on condition of anonymity and said a final decision had not been made. The seven of 21 OPEC+ members due to meet are Saudi Arabia, Iraq, Kuwait, Algeria, Kazakhstan, Russia, and Oman.
Early Market Call – as of 8:00 AM EDT
WTI – July $97.50, down 50 cents
RBOB – June $3.4439, down 1.13 cents
HO – June $3.9489, down 5.97 cents
