Welcome to Crude Oil Today, my brief look at what's happening in oil markets and what it might mean for prices.
As ever, feedback welcome
While oil initially rose on the bellicose rhetoric from the Iranian president over the weekend which was matched by President Trump and Secretary of State Pompeo yesterday. But prices reversed as traders recognise the Saudi commitment to man the pumps. WTI fell 0.62% to $67.84 and Brent dropped back to $72.99 for a 0.1% fall off a $74.47 high overnight.
The battle was joined yesterday with both President Trump and Secretary of State Pompeo hitting back at Iran after Hassan Rouhani’s speech over the weekend.
Pompeo compared the Iran elites to Mafia Dons and tweeted that for them the economy was doing well while everyone else in the country suffers.
President Trump went one further fairly shouting on Twitter at the Iranians saying, “To Iranian President Rouhani: NEVER, EVER THREATEN THE UNITED STATES AGAIN OR YOU WILL SUFFER CONSEQUENCES THE LIKES OF WHICH FEW THROUGHOUT HISTORY HAVE EVER SUFFERED BEFORE. WE ARE NO LONGER A COUNTRY THAT WILL STAND FOR YOUR DEMENTED WORDS OF VIOLENCE & DEATH. BE CAUTIOUS!” They are all HIS capital letters.
Overnight the Iranians played an amazingly straight bat to the US comments. CNBC reported that Mohsen Taheri, publisher of IRNA the state-owned news agency said, "Both America and Iran have threatened one another in different ways for several years". Indeed it's worth noting that Rouhani was pretty bellicose himself but also held out an olive branch in his speech saying "America should know that peace with Iran is the mother of all peace, and war with Iran is the mother of all wars".
Okay, I can see why that wouldn't be read positively. But, nonetheless...
Anyway assailed by the war of words traders do what traders do and drove crude prices higher.
But, this morning, the narrative I’m hearing and reading about is that the Saudis and others are working to keep production up in order to facilitate this US argument with Iran. Yesterday I reported that some Saudi production had gone unsold. That suggests an overhang and while an actual war would likely drive crude prices much higher, for the moment the focus turned quickly back toward efforts to keep prices in check.
So both crude and WTI reversed sharply and quickly off the overnight highs.
Thus I retain a mid $66 region target for Brent and should WTI break the same level it can run to $61.70/62.00. The bottom of the current uptrend channel.
On the day today it’s “flash” PMI day with releases in Japan, across Europe and the US giving a window into the “official” figure which will be released early next month. Other than that it’s the Richmond Fed index in the US as the other semi-interesting datapoint.
Have a great day's trading.
Chief Market Strategist
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