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Oil Price Fundamental Daily Forecast – Bullish API Report Drives Crude Oil to Multi-Year Highs

U.S. West Texas intermediate and international-benchmark Brent crude oil finished Tuesday’s session sharply lower in a move fueled by President Trump’s decision to withdraw from the 2015 Iran nuclear deal.

June WTI crude oil settled at $69.06, down $1.67 or -2.42% and July Brent crude oil closed at $74.85, down $1.32 or -1.76%.

WTI Crude Oil
Daily June West Texas Intermediate Crude Oil

In announcing his intention to leave the deal, President Trump said, “We will be instituting the highest level of economic sanction. Any nation that helps Iran in its quest for nuclear weapons could also be strongly sanctioned by the United States.” Renewed sanctions could crimp Iran’s oil shipments which total about 2.5 million barrels a day. This could be supportive for prices.

The market was somewhat soothed by a statement immediately following the president’s announcement by Treasury Secretary Steven Mnuchin. In a prepared statement, he said “Sanctions will be reimposed subject to certain 90-day and 180-day wind-down periods. At the conclusion of the wind-down periods, the applicable sanctions will come back into full effect.”

Brent Crude Oil
Daily July Brent Crude Oil

Forecast

Crude oil is trading higher early Wednesday. The catalysts behind the rally are speculative buying related to Trump’s decision to leave the Iran nuclear deal and trader reaction to a bullish inventories report from the American Petroleum Institute (API).

At 0824 GMT, June WTI crude oil is trading $70.98, up $1.92 or $2.78% and July Brent crude oil is at $76.92, up $2.07 or +2.77%. Both futures contract hit multi-year highs.

The API reported a draw of 1.85 million barrels to U.S. crude oil inventories for the week-ending May 4. Traders were looking for a smaller draw of 719,000 barrels.

The API also reported a draw in gasoline inventories for the week-ending May 4 of 2.055 million barrels. Traders were expecting a draw of 450,000 barrels.

Distillate inventories saw a huge draw this week of 6.674 million barrels. Analysts had forecast a much smaller decline of 1.375 million barrels.

The trend is up and the news is bullish so the market is rallying. Today’s U.S. Energy Information Administration’s weekly inventories report will either reaffirm the bullish tone, or trigger a reversal to the downside.

The EIA report, due to be released at 1430 GMT, is expected to show a draw of 200,000 million barrels.

Any news that Trump is still open to changes to the current Iran nuclear deal from Europe or Asia could encourage profit-taking.

This article was originally posted on FX Empire

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