Crude Stays Bid Amidst Ceasefire Uncertainty
Crude Remain Higher Despite Ceasefire Extension
Oil prices are pushing higher again today as uncertainty around US/Iran peace talks continues to dominate markets. While risk assets have been generally higher over the last week, reflecting optimism that a deal can be done (or at least that, for now, the war is paused), oil prices have been pushing higher also. The lack of downside follow-through, particularly in response to this week’s ceasefire extension, suggests scepticism around peace prospects and the remaining risk that the ceasefire breaks down. With the standoff over the Strait of Hormuz ongoing, Trump has warned that there is no timeline to end the war. This follows threats over the weekend to destroy Iranian energy infrastructure if a deal is not agreed. As such, traders remain on high alert with incoming news flow the main driver for oil prices near-term. There are big volatility risks seen over the weekend with Trump signalling that talks could resume in coming days despite tensions in the Strait remaining elevated amidst reports of Iran targeting foreign ships and the UDS maintaining its blockade.
EIA Inventories Surplus
Away from the Middle East news cycle, the latest data from the EIA this week pointed to an unexpected build in crude inventories. US crude stores rose to 1.9 million barrels from -0.9million prior, well above the -1.9 million level reported a week earlier. However, fuel stocks were seen tightening with gasoline stores plunging almost 5 million barrels on the week alongside a drop in distillate stores also. The data shows that fuel demand hasn’t been hurt by the recent rise in pump prices, underpinning oil prices near-term.
Technical Views
Crude
The rally in crude has stalled for now into the 95.06 level and with momentum studies declining, a fresh turn lower could be seen, putting focus back on 84.60. While that level holds as a floor, however, the broader outlook remain bullish with 101.69 the next bull target to note.
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