Recap: The oil market erased its sharp gains on Thursday following a geopolitical risk fueled rally on Wednesday. The crude market gapped higher on the opening from $68.37 to $69.03 and quickly posted a high of $69.29 following the U.S. decision to move personnel from the Middle East ahead of talks with Iran over the country’s nuclear program. The market was well supported amid the news of a potential military strike against Iran by Israel. However, the oil market backfilled its opening gap and retraced more than 50% of its move from Wednesday’s low of $64.60 to its high of $69.29 as it posted a low of $66.72 early on Thursday morning. The market later retraced some of its losses and traded back towards the $68.50 level, where it held resistance during the remainder of the session. The July WTI contract settled down 11 cents at $68.04 and the August Brent contract settled down 41 cents at $69.36. The product markets also ended the session lower, with the heating oil market settling down 1.66 cents at $2.1887 and the RB market settling down 2.39 cents at $2.1429.
Technical Analysis: While the market has given up some of its gains, its losses will remain limited amid the increased geopolitical tension in the Middle East. The market is seen trending sideways as traders stay on the sidelines amid the uncertainty and wait for developments on the U.S.-Iran nuclear talks scheduled for Sunday in Oman. The crude market is seen finding support at its low of $66.72, $66. 39, $64.60, $64.57, $64.20. Further support is seen at $62.82, $62.50 and $62.20-$62.17. Meanwhile, resistance is seen at its high of $69.29, $70.00, $70.33, basis a resistance line.
Fundamental News: The Omani Foreign Minister said the sixth round of U.S.-Iran nuclear talks will be held on Sunday in Muscat, after U.S. President Donald Trump reiterated that Iran would not be allowed to have a nuclear weapon. On Wednesday, President Trump said U.S. personnel were being moved out of the Middle East because “it could be a dangerous place”. Reuters reported that the U.S. was preparing an evacuation of its Iraqi embassy and would allow military dependents to leave locations around the Middle East due to heightened security risks in the region. U.S. and Iraqi sources did not say what security risks had prompted the decision. A U.S. official said the State Department had authorized voluntary departures from Bahrain and Kuwait. On Wednesday evening, the State Department updated its worldwide travel advisory to reflect the latest U.S. posture. On Thursday, a senior Iraqi official overseeing operations in southern oilfields, said foreign energy companies were continuing their operations as usual.
U.S. President Donald Trump said that an Israeli strike on Iran “could very well happen” but he would not call it imminent and that he would prefer to avoid conflict with Tehran and reach a peaceful solution over its nuclear program.
A senior Iranian official said Iran will not abandon its right to uranium enrichment because of mounting frictions in the region, adding that a “friendly” regional country had alerted Tehran over a potential military strike by Israel. The official said the tensions were intended to “influence Tehran to change its position about its nuclear rights” during talks with the United States on Sunday. He did not disclose the name of the regional country that warned Iran about the Israeli attack. Meanwhile, a senior Iranian security official said U.S. military dependents leaving the region does not constitute a threat, amid concerns that evacuation of non-essential personnel may be the preamble to regional escalation. During Sunday’s meeting in Oman’s capital, Iran is expected to share a counterproposal to a U.S. offer to bridge the gaps.
Israel launched large scale strikes against Iran early Friday, saying it targeted nuclear facilities, ballistic missile factories and military commanders at the start of a prolonged operation to prevent Tehran from building an atomic weapon. Iran promised a harsh response.
Early Market Call – as of 9:05 AM EDT
WTI – Jul $73.77, up $4.92
RBOB – Jul $2.2403, up 7.85 cents
HO – Jul $2.3292, up 12.02 cents
