Tuesday, 22 May, 2018

WTI Crude Slips After Failing to Break January Highs

Oil Price Outlook Oil Price Outlook
| 29 April, 2018, 00:55

On Wednesday, oil futures settled modestly higher, bouncing back from earlier weakness that was driven by data showing an unexpectedly weekly climb in USA crude supplies.

Oil prices on Thursday morning, April 26, rose amid expectations of the resumption of USA sanctions against Iran, declining output in Venezuela and ongoing strong demand. Brent crude oil is in a position to close higher for a third week in row, while the WTI crude oil futures contract is trading lower. Subscribe on Apple Podcasts.

U.S. crude oil inventories increased last week ending April 20, and the refining sector fell 328,000 barrels per day from the previous week's average, the U.S. Energy Information Administration (EIA) said in a report on Wednesday.

Meanwhile, West Texas Intermediate gained 39 cents, or 0.57 per cent to Dollars 68.44, while global benchmark Brent rose 50 cents, or 0.68 per cent to USD 74.50 a barrel.

At 0754 GMT, June WTI crude oil futures are trading $67.93, down $0.25 or -0.37% and June Brent crude oil is at $74.60, down $0.14 or -0.19%.

In addition to fundamentals, there has been a shift in geopolitical sentiment after France's president Emmanuel Macron yesterday called for a new Iran deal to avoid the imposition of US sanctions against Tehran that the latter warned will lead to serious consequences, without going into detail.


Geopolitical tensions including the prospect of fresh sanctions on Iran and disruption to the country's oil flows helped push oil higher this month. A slight suggestion that President Trump might accept a revised deal between the six Western powers who signed the original nuclear deal with Iran on Tuesday did halt the price rise, but it was temporary.

Venezuela's crude production has already tumbled from nearly 2.5 million barrels per day (bpd) in early 2016 to around 1.5 million bpd due to political and economic crisis.

Soaring U.S. output has made WTI crude around $6 per barrel cheaper than Brent and drawn exports to record highs over 2 million bpd.

Also Tuesday, the 10-year U.S. Treasury yield broke through to a 3 percent yield. "Not so long ago, many doubted that the Federal Reserve would announce three increases of 25 basis points in its key rates during the year".

With US output and exports surging, some analysts warn that the 20 percent climb in Brent prices since February is starting to look overdone. Said Greg McKenna, chief market strategist at futures brokerage AxiTrader, "The market does look a little toppish".

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