Recap: The oil market pared early gains and ended the session up 0.84% after rallying over 5.4% earlier in the session on an announcement from Iran’s military that a wave of attacks on Israel was over. The market rallied sharply higher on the opening on Sunday evening after renewed Israeli strikes on Iran and attacks on Lebanon reduced hopes of an imminent end to the war with Iran. Israel struck a petrochemical plant in Iran that it said was used to produce ballistic missiles and Iran’s Islamic Revolutionary Guard Corps said the country retaliated with a strike aimed at a similar Israeli facility in the city of Haifa. The exchange followed Israeli strikes against Hezbollah in Beirut over the weekend. The oil market rallied to a high of $95.47 early Monday morning. However, the market erased all of its gains and sold off after Iran announced an end to its attacks on Israel. U.S. President Donald Trump demanded that Israel and Iran immediately stop the strikes against each other. The crude market sold off to a low of $90.39 by mid-morning. The market later retraced some of its losses and traded in a sideways trading range during the remainder of the session. The July WTI contract settled up $1.76 at $91.30 and the August Brent contract settled up $1.26 at $89.25. The product markets ended the session lower, with the heating oil market settling up 1.25 cents at $3.5999 and the RB market settling up 2.47 cents at $3.0706.
Technical Analysis: The crude market will remain driven by the latest headlines. While Iran announced the end of attacks, it warned of harsher attacks if Israel continued to strike Lebanon. Also, the market will remain concerned over the flows through the Strait of Hormuz may remain restricted for longer, with Iran’s ambassador to Russia stating that the Strait would be open but under conditions to be set by Iran and Oman, including a transit fee. The oil market is seen finding support at $90.39, $89.68, $88.98, $88.45, $86.35, $86.13, $84.28 and $82.50. Meanwhile, resistance is seen at $92.15, $94.07, $95.47, $95.91, $97.00 followed by $98.51, $99.43, $102.66, $104.45, $104.86 and $105.21.
Fundamental News: OPEC+ agreed on Sunday to a fourth increase in its oil output targets in as many months, even though the U.S. war with Iran is still preventing several of the group’s members from producing more. Seven core members of OPEC+, which groups OPEC and allied producers including Russia, have increased their output quotas from April to June by almost 600,000 bpd. However, according to OPEC figures, the group’s production has collapsed due to export cuts by Gulf members, averaging 33.19 million bpd in April compared with 42.77 million in February. On Sunday, the seven members decided to increase targets by 188,000 bpd from July. This is the same as the June hike, which was adjusted down from monthly increases of 206,000 bpd in May and April to take into account the UAE exit. The seven countries are increasing production as part of the gradual unwinding of a 1.65 million bpd production cut that the group, which at the time included UAE, agreed in 2023. From July, the seven have about 567,000 bpd of the original cut to return to the market, taking into account the UAE exit from May 1st. That would mean the rest of the cut will be unwound by the end of September should OPEC+ stick to monthly hikes of about 188,000 bpd for August and September.
IIR Energy reported that U.S. oil refiners are expected to shut in about 130,000 bpd of capacity in the week ending June 12th, increasing available refining capacity by 6,000 bpd from the previous week.
Early Market Call – as of 8:55 AM EDT
WTI – July $89.37, down $1.91
RBOB – July $3.0739, up 93 points
HO – July $3.5788, down 1.25 cents
