U.S. West Texas Intermediate and international-benchmark Brent crude oil finished modestly higher on Thursday, continuing the rebound rally that drove the market higher the previous session.
June WTI crude oil settled at $68.19, up $0.14 or +0.21% and June Brent finished at $74.74, up $0.74 or +1.00%.
Concerns that the U.S. may reimpose sanctions on Iran helped underpin the markets as this represents a threat to supply. Gains were likely limited by this week’s higher than expected U.S. crude oil and gasoline inventories as well as rising U.S. production.
Forecast
Crude oil futures are trading lower early Friday. Despite yesterday’s higher close, the markets never traded higher today. This suggests that yesterday’s rally may have been driven by late session position-squaring or short-covering into the close.
At 0754 GMT, June WTI crude oil futures are trading $67.93, down $0.25 or -0.37% and June Brent crude oil is at $74.60, down $0.14 or -0.19%.
There is a price divergence in the market that could raise some concerns amongst traders. Brent crude oil is in a position to close higher for a third week in row, while the WTI crude oil futures contract is trading lower.
Supply disruptions in Iran will have a stronger bullish influence on Brent prices, while rising U.S. inventories and production will have a bigger impact on WTI prices.
The underlying narrative remains the same. Prices will be supported by continued adherence to the OPEC-led production cuts, increased demand from Asia, possible supply disruptions in Iran and turmoil in Venezuela.
Prices will be pressured by rising U.S. production as shale drillers try to take advantage of higher prices by ramping up activity.
The key factor that should keep volatility at elevated levels until at least May 12 is whether the Trump Administration will restore sanctions on Iran that were lifted during the Obama Administration after an agreement over its disputed nuclear program.
Additionally, traders expect a report on Friday by energy services firm Baker Hughes to show that U.S. producers increased the rig count.