| Commoditiy | Price | Weekly Change | 50day-Ave | 100day-Ave | 200day-Ave |
|---|---|---|---|---|---|
| Brent ($/b) | 65.99 | 0.40 | 63.18 | 64.08 | 65.79 |
| US WTI ($/b) | 61.91 | 1.28 | 59.02 | 60.06 | 62.30 |
| ICE Gasoil ($/MT) | 693.25 | 13.50 | 653.92 | 680.28 | 675.13 |
| Jet CIF NWE ($/MT) | 728.55 | 14.80 | 699.40 | 718.08 | 709.62 |
In recent weeks, the market has become increasingly concerned about the US naval flotilla that Trump directed towards the Middle East. Those concerns reached their peak last week after Trump posted on social media that "A massive Armada" was heading to Iran. He expressed hopes of a deal to resolve the nuclear issues, however, suggesting that some kind of negotiation was going on, but also warned that "Time is running out" and that "The next attack will be far worse!" than the one last year when the US bombed nuclear facilities. That sent Brent over 70 \$/b, especially after the Iranians denied that any talks were going on.
However, over the weekend, both sides confirmed that talks were taking place and so the market has calmed down today. Brent opened lower overnight and is now back to the 65-66 \$/b area. The nature of the deal being discussed has not been made public and it is hard to say how things will progress from here. The market is likely to remain nervous until details are clearer.
Were it not for the risk premium connected with Iran, it is likely that Brent would be testing downside, possibly below 60 \$/b – that’s were the market was before these Iran risks emerged. If some kind of deal is announced that seems to satisfy Trump and the US navy is moved away, the market could go back to testing those levels.
If no deal is reached, then the question is over the nature of any ensuing confrontation. If it is a limited strike on the nuclear facilities, like last summer and Iran does not respond to that in a manner that leads to further US action, then the situation might dissipate as it did before, with a brief spike and a resumption of testing downside afterwards. However, a messier outcome that embroils the US in a protracted conflict, increases the prospect of disruptions to crude exports out of the Arabian Gulf and becomes a more serious risk that market will need to price in. That could lead to prices moving significantly higher.
So, while oil prices have fallen, it is too early to draw a line under the Iran situation.
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