U.S. West Texas Intermediate and international-benchmark Brent crude oil settled sharply higher on Monday, driven by bullish comments from Israeli Prime Minister Benjamin Netanyahu.
Netanyahu said Israel has evidence that Iran lied about its nuclear program after signing the 2015 agreement with global powers. Iran dismissed Netanyahu’s accusations, calling them “propaganda”. He went on to say the he was sure U.S. President Donald Trump would do “do the right thing” in reviewing Iran’s nuclear deal with western powers.
Trump has until May 12 to decide whether to restore sanctions on key oil-producer Iran that were lifted after the international agreement.
Traders fear that new sanctions will lead to a supply disruption that could lead to higher prices.
Forecast
There has been no follow-through to the upside on Tuesday after yesterday’s spike to the upside. The price action suggests that the move may have been fueled by short-covering rather than new buying. Netanyahu’s statement really didn’t change anything about the Iran situation. It is likely the same piece of intelligence that Trump is considering when making his decision about reimposing the sanctions on Iran.
At 0832 GMT, June WTI crude oil futures are trading $68.27, down $0.30 or -0.44% and July Brent is at $74.30, down $0.44 or -0.59%.
While speculation about Iran is supporting higher crude oil prices, the reality is U.S. production continues to increase and this could keep a lid on prices.
On Monday, the Energy Information Administration (EIA) said in a monthly report that U.S. crude production jumped 260,000 barrels per day (bpd) to 10.26 million (bpd) in February, the highest on record.
The market is likely to be rangebound today as the potential for sanctions on Iran remains supportive while rising U.S. production keeps a lid on gains.
Later today, traders will get the opportunity to react to the latest inventories data from the American Petroleum Institute.