Crude Oil, Brent Oil, Iran, EIA, OPEC, Outflow, Technical Outlook – TALKING POINTS
- WTI and Brent crude oil prices drop after strong start to week as traders assess market
- A potential agreement between Washington and Tehran could see the return of Iranian oil to the market
- Crude Oil prices could retest the 61.8% Fib level if the bears break below the 90 psychological level
WTI and Brent crude oil prices are falling in Asia Pacific trading, with benchmarks trading around 0.10% after a strong open for the week. A better-than-expected Chinese trade surplus for July reflects strong external demand that has helped ease recession fears. China also imported more oil compared to June, but still less than the same period last year.
A draft text to restore the 2015 US-Iran nuclear deal was finalized early this week after several stalled rounds of talks over the past year and a half. If Washington and Tehran accept the conditions set out in the draft, it could lead to the lifting of sanctions against Iran, including oil exports. Iran would likely be able to supply more than a million barrels a day, although no specific timetable is known. Overall, a deal would likely put pressure on oil prices on additional supply.
Meanwhile, oil traders await inventory reports from the American Petroleum Institute and the Energy Information Administration. Analysts see the EIA reporting a 400,000 barrel drop in crude oil inventories for the week ending August 5. Later this week, the Organization of the Petroleum Exporting Countries (OPEC) will release its monthly Petroleum Market Report (MOMR). The US Consumer Price Index, due out this week, has the potential to bolster bets on a Fed rate hike if the headline figure beats consensus forecast of 8.7% year-on-year. This would likely weigh on commodity prices, including oil.
WTI’s rapid spread, the difference between current and next month’s contract prices, is approaching the lowest level since April after falling for four straight weeks. While still in reverse, this is a bearish signal for the commodity. The RBOB/CL 1:1 crack spread, a theoretical indicator of refiner margins, also saw significant declines. Overall, bearish signs but ultimately inventory levels and broader macro indicators, including the OPEC report, are more likely to boost price action.
WTI Crude Oil Technical Outlook
WTI oil prices are at risk of falling below the psychological 90 level as losses mount via APAC exchanges. This would expose the 61.8% Fibonacci retracement level, which has defended several intraday attempts to push lower. Alternatively, if prices hold the 90 level and rebound, the decline in the 20-day simple moving average (SMA) would become a potential target.
WTI Crude Oil Daily Chart
Chart created with TradingView
— Written by Thomas Westwater, Analyst for DailyFX.com
To contact Thomas, use the comments section below or @FxWestwater on Twitter