Oil News: Crude Oil Futures Stall as Iran Talks Ease War Premium Fears

Crude Oil Consolidates After War Premium Unwinds on Iran Talks

April West Texas Intermediate (WTI) crude oil prices are consolidating on Wednesday after a 2% drop the previous session sent the market to its lowest level since February 3. The price action suggests some liquidation by war premium buyers on positive feedback from the talks between the U.S. and Iran. Today’s stable trade indicates there is a little caution in the air after yesterday’s session failed to produce a deal or at least the framework of a final agreement.

Bulls Are Lightening Up, But the War Premium Isn’t Gone Yet

I believe we’re at a serious juncture in the negotiation, but this is where it gets dicey for traders. With the market well above both the 200-day and 50-day moving averages, the war premium is still intact, but pulling away from the two recent tops at $65.61 and $65.99 suggests that some bullish traders have been lightening up as the talks progress. Furthermore, the market is straddling a 50% level at $62.19, which indicates a balanced trade.

Mixed Messages From Washington and Tehran Keep Traders Guessing

Mixed assessments of the situation are helping to generate some of the uncertainty. On one hand, we have a U.S. navy fleet in the Strait of Hormuz that is an active threat to Iran. This may have prompted the political consultancy Eurasia Group to tell its clients that it thinks there is a 65% probability of U.S. military strikes against Iran by the end of April, Reuters reported.

Then we have skeptical analysts warning that a finalized agreement remains distant and diplomatic momentum could crumble at any time. Additionally, Iranian Foreign Minister Abbas Araqchi provided no clarity with his mixed message. He said Tuesday that Iran and the U.S. had reached an understanding on main “guiding principles,” but added that it doesn’t mean a deal is imminent.

While Diplomats Talk, Inventory Reports Could Move the Market

With some traders sitting tight while the nuclear negotiations continue, others are focusing on inventories reports that could sway the trade in either direction. If you recall, last week prices fell sharply after a big U.S. crude build and a bearish statement about demand from the International Energy Agency (IEA).

Today, traders will be focused on the weekly report from the American Petroleum Institute (API), due late in the session. Tomorrow the focus will shift to the U.S. Energy Information Administration’s (EIA) weekly inventories data. Early guesses suggest crude oil inventories rose by 2.3 million barrels, but gasoline and distillates may have dropped.

The Technical Picture: Uptrend Weakening at a Critical Pivot

Technically, the main trend is up, but momentum is weakening. The short-term range is $58.40 to $65.99. Currently, April WTI crude oil is straddling the midpoint of this range at $62.19.

A failure to hold $62.19 opens the door to a test of the 200-day moving average at $60.79, followed by another key 50% level at $60.43.

On the upside, the first resistance is a pivot at $63.35. Bullish traders will have to overcome a major trend line at $63.56 to shift momentum to the upside and set up the next rally into $65.61 to $65.99.

More Information in our Economic Calendar.