Looking for fear in the oil market? Look no further than the Brent versus West Texas Intermediate oil spread that blew out to the highest level all year and the highest since 2015, with Brent holding a $7.30 per barrel premium currently above WTI. European and Asian buyers of Brent are pricing in the risks and realities of the fallout from sanctions on Iran to increased tensions in the Gaza strip as well as the inability of traditional Brent oil producers to fill that void.
Crude oil prices are hovering just below a three-year high as many are still shocked that oil prices are again trading this high. Oil prices started out strong on Iranian-Israeli war tensions but pulled back after data from Genscape put crude storage at Cushing, Okla., at 39.56 million barrels as of Tuesday, up 479,644 barrels from Friday.
Oil has taken off like a rocket as Israel strikes Iranian targets in Syria in response to rocket fire overnight. Israel says it targeted Iran’s military infrastructure in Syria, in response to an Iranian rocket attack on the occupied Golan Heights.
U.S stocks ended mixed on the news while oil prices fluctuated in each direction, as investors considered the potential negative ramifications of Trump’s decision. The U.S President adopted a very aggressive rhetoric during the announcement and failed to hold back from his view that the 2015 agreement was “defective” at its core.
Crude prices are going nuclear as President Donald Trump pulled out of the Iranian nuclear accord creating a new risk dynamic for global oil markets. The decision by president Trump to pull the plug on what he said was a horrible deal comes as global oil demand is rising and the lack of investment in the oil patch is making it difficult for global oil production to keep pace with demand.
The U.S. dollar/Canadian dollar (USD/CAD) currency pair, which tends to move inversely with oil prices, has finally broken out above the key 1.2900/20 resistance zone after spending several days in a tight consolidation range.
Crude oil prices surged closing at above $70 a barrel for the first time in three-and-a-half years, only to have a nuclear meltdown in aftermarket trading. WTI further set a record 2.7 million contracts of open interest but fell hard after President Donald Trump tweeted that he would announce his decision on the Iran nuclear deal on May 8, 2 p.m. Eastern.
Crude oil prices face a day of reckoning as the United States decides whether it will remain in the Iranian nuclear accord, as well as the realization is that due to underinvestment in oil, it might be difficult to replace Iranian oil if it is taken off the market.