Oil Price Fundamental Daily Forecast – Trump’s Decision on Iran Has Oil in Holding Pattern

U.S. West Texas Intermediate and international-benchmark Brent crude recovered from early weakness on Wednesday to close higher for the session. The early sell-off was fueled by a surprise build in U.S. crude inventories and a stronger U.S. Dollar. The markets recovered to close higher because the build in inventories was largely concentrated on the U.S. West Coast.

On Wednesday, June WTI crude oil settled at $67.93, up $0.68 or +1.01% and July Brent crude oil closed at $73.36, up $0.23 or +0.31%.

Prices fell after the U.S. Energy Information Administration reported a surprise build of 6.2 million barrels in the week-ending April 27. Traders were looking for a build of only 1.0 billion barrels. Traders shrugged off the news because the surprise rise in inventories was largely concentrated on the West Coast where supply jumped nearly 5 million barrels.

Gasoline stockpiles also climbed by 1.2 million barrels for the week, while distillate stockpiles fell by 3.9 million barrels, according to the EIA. Traders were looking for a supply decline of 1 million barrels for gasoline, while distillate stockpiles were expected to be down by 1.3 million barrels.

Forecast

Crude oil is trading nearly flat early Wednesday as investors continue to wait for the proverbial shoe to fall in regards to the sanctions on Iran.

At 0717 GMT, June WTI crude oil is trading $67.91, down $0.03 or -0.04% and July Brent crude oil is at $73.32, down $0.04 or -0.05%.

The current sideways trade in crude oil is being fueled by President Donald Trump’s threat to reimpose sanctions if adjustments are not made to Iran’s nuclear program agreement and the surge in U.S. shale supply.

Trump will decide by May 12 whether to restore U.S. sanctions on Iran, which would likely reduce its oil exports. Iran’s oil exports hit 2.6 million barrels per day (bpd) in April, according to the Oil Ministry, a record since the lifting of sanctions.

If Trump decides to walk away from the Iran deal, crude oil prices could spike higher. However, the rising U.S. Dollar, which could limit demand, and soaring U.S. production may put a lid on those gains.