Oil Price Fundamental Daily Forecast – Profit-Taking Ahead of API Report Could Be Weighing on Prices

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower shortly before the New York opening after giving back earlier gains. Despite the move, the market is still hovering around its highest level since May 18 after surging nearly 8% since last Friday.

At 09:30 GMT, July WTI crude oil is trading $65.54, down $0.51 or -0.77% and August Brent crude oil is at $68.04, down $0.42 or -0.61%.

Prospect of Iran Glut Wanes

Reuters is reporting that the recent jump in prices is likely being fueled by investors tempering expectations of an early return of oil exporter Iran to international crude markets. Last week, worries that Iran was soon going to start selling oil if an agreement resulted in the lifting of U.N. and other sanctions on crude exports drove prices sharply lower.

With talks between the U.S. and Iran so far yielding inconclusive results, both parties are set to resume indirect negotiations in Vienna this week. Talks nearly fell apart over the weekend but they were revived after Tehran and the U.N. nuclear agency extended a monitoring agreement on the Middle Eastern country’s atomic programme.

On Sunday, U.S. Secretary of State Antony Blinken told CNN:  “We’ve actually made progress.” However, on Monday he backed away from that statement.

“U.S. Secretary of State Antony Blinken poured cold water over the prospect of a revival, stating that there was no indication that Iran is willing to comply with nuclear commitments,” Sophie Griffiths, market analyst at OANDA, said in a client note.

US Drillers Add Oil and Gas Rigs for Fourth Week in a Row – Baker Hughes

U.S. energy firms added oil and natural gas rigs for a fourth week in a row as higher oil prices prompt some drillers to return to the wellpad.

The oil and gas rig count, an early indicator of future output, rose two to 455 I the week to May 21, its highest since April 2020, energy services firm Baker Hughes Co said in its closely followed report last Friday.

The total rig count was up 137 rigs, or 43%, over this time last year. It was also up 86% since falling to a record low of 244 in August 2020, according to Baker Hughes data going back to 1940.

U.S. oil rigs rose four to 356 this week, their highest since April 2020, while gas rigs fell one to 99.

First Look at Crude Oil, Fuels Weekly Inventory Numbers

The American Petroleum Institute (API) releases its weekly statistical bulletin on Tuesday and the Energy Information Administration (EIA) follows up its weekly data on crude oil, gasoline and distillate stockpile changes on Wednesday.

Last week, the API reported a build in crude oil inventories of 620,000 barrels for the week ending May 14. Analysts had predicted a build of 1.680 million barrels for the week.

The API also reported a draw in gasoline inventories of 2.837 million barrels for the week-ending May 14. Analysts had expected an 886,000 barrel draw for the week. Distillate stocks saw a decrease in inventories this week of 2.581 million barrels for the week.

The API will release its latest report at 20:30 GMT.

Short-Term Outlook

Uncertainty over whether or not there will be increased oil supply from Iran may be helping to cap gains. Furthermore, value may also be an issue following a nearly 8% jump in less than three days.

Traders seem to be a little cautious about buying strength at current price levels and may be waiting for a short-term pullback before re-entering on the long-side.

Nervousness ahead of this afternoon’s API inventories report could also be encouraging investors to lighten up on the long side.

For a look at all of today’s economic events, check out our economic calendar.