In the week since our last edition of What’s Affecting Oil Prices, prices jumped on President Trump’s announcement that the U.S. was withdrawing from the JCPOA and immediately reinstating sanctions against Iran.
Brent averaged $76.56/bbl, $2.53/bbl above the prior week. While the reaction from WTI was more muted at first, U.S. crude ended up following the same path as Brent, up $2.22/bbl to average $70.60/bbl last week. This week could see Brent prices range bound to slightly down, averaging $75/bbl.
Iran and the remaining JCPOA signatories are all scheduled to meet this week to see if the deal can be salvaged. Otherwise, Iran has made clear it will immediately resume nuclear enrichment. While expected to have less of an impact, the opening of the U.S. embassy in Jerusalem today, and the protests scheduled against it, will only add to general tensions.
On May 16, the International Energy Agency will release the May edition of its monthly Oil Market Report. While unlikely, any warnings about potential oversupply based on recent U.S. growth levels would be bearish for market sentiment.
Geopolitics will be a positive factor. Prices will be supported by discussions between Iran and the remaining JCPOA signatories. If European leaders are unable to salvage the deal Iran has announced it will immediately restart its nuclear enrichment program.
The dollar will be a neutral factor in the week ahead as fundamental and sentiment-related drivers continue to have more impact on crude oil prices.
Trader Sentiment: Neutral
Trader sentiment will be a neutral factor in the week ahead although sentiment could be impacted by the upcoming IEA monthly oil market report.
Supply will likely be a negative factor in the week ahead.
Demand remains a positive factor and is generally strong.
Refining will be a neutral factor in the week ahead.
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