Recap: The oil market seesawed on Monday and ended the session up 5.49% as the market rallied sharply higher and later gave up some of its sharp gains ahead of the close. The market was well supported early in the morning after Iran’s Tasnim news agency reported that Iran was halting indirect negotiations with the U.S. and plans were being made for Iranian forces and their allies to completely block the Strait of Hormuz and take action elsewhere, including the Bab El Mandeb Strait. Iranian state TV also said that ceasefire agreed between Iran and the U.S. in early April is likely to end if Israel continues to attack Hezbollah. The crude market continued to trend higher in overnight trading as Iran and the U.S. continued to trade strikes over the weekend and Israel ordered troops to move further into Lebanon in its fight with Hezbollah. The market extended its earlier gains to over $7.42 as it rallied to a high of $94.78 on the news of Iran suspending its negotiations. The market retraced more than 38% of its move from a high of $105.21 to a low of $86.35. However, the market later retraced some of its gains after President Donald Trump said he had not heard from Iran that they are suspending talks. President Trump also said that Israel would not send troops to Beirut following a phone conversation with Israeli Prime Minister Benjamin Netanyahu and added that Hezbollah agreed to cease fire. The July WTI contract settled up $4.80 at $92.16 and the August Brent settled up $3.87 at $89.17. The product markets ended the session higher, with the heating oil market settling up 15.08 cents at $3.6394 and the RB market settling up 5.03 cents at $3.0847.
Technical Analysis: The oil market will continue to trade in its recent trading range as the market weighs President Trump’s statements that raised hopes a truce in Lebanon could hold against the latest news of Israel stating that it will strike terror targets in Beirut if Hezbollah does not stop its attacks against Israel. The oil market will remain headline driven amid the possibility that Iran’s indirect negotiations with the U.S. was halted. The market is seen finding resistance at $94.78, $95.78, $97.57, $98.01, $99.43, $102.66, $104.45, $104.86 and $105.21. Meanwhile, support is seen at $90.80, $89.27, $88.45, $86.35, $86.13 and $84.28.
Fundamental News: Three sources said OPEC+ oil-producing countries will likely agree a further increase in their output target for July when they meet on Sunday, though the Iran war has so far prevented several from delivering previous increases. 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. In reality, the group’s production has collapsed due to export cuts by Gulf members, averaging 33.19 million bpd in April versus 42.77 million in February. Sources said the monthly target set by the seven is expected to increase by about 188,000 bpd for July. This is the same as the hike agreed for June, which was adjusted down from 206,000 bpd to take into account the UAE exit. From July, the seven will 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.
Bloomberg reported that wildfires started in Canada’s oil sands-producing region of Alberta with large blazes within 12.4 miles of about 500,000 bpd of crude production.
IIR Energy reported that U.S. oil refiners are expected to shut in about 138,000 bpd of capacity in the week ending June 5th, increasing available refining capacity by 99,000 bpd from the previous week. Offline capacity is expected to increase to 144,000 bpd in the week ending June 12th.
Early Market Call – as of 8:45 AM EDT
WTI – July $91.15, down $1.32
RBOB – July $3.0740, down 1.57 cents
HO – July $3.6110, down 3.83 cents
