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Crude Corrects As Middle East Tensions Settle

OIL

Oil prices fell sharply as the geopolitical risk premium partially unwound as there was no further escalation of tensions in the Middle East and relations settled. Also the larger-than-expected US inventory build weighed on crude. The softer greenback didn’t provide support with the USD index down 0.4%.

  • WTI is down 2.9% to $82.86/bbl and has started today slightly below this level at $82.79. It fell to a low of $82.55 after the EIA report. WTI breached $84.01 opening up $81.06.
  • Brent fell 3.0% to $87.29/bbl. It had been trading above $89 before the US stock data and then fell to a low of $87.13 following it. The benchmark fell below initial support of $88.28, 20-day EMA, with the next level at $85.27, 50-day EMA.
  • EIA reported that crude inventories rose 2.74mn barrels last week but gasoline fell 1.15mn and distillate -2.76mn. Refining utilisation fell 0.2pp to 88.1%, lower than expected.
  • The US House is planning further sanctions on Iranian oil as part of the Ukraine Bill.
  • Today the US easing of sanctions on Venezuela expire and it has decided not to reinstate them, as the condition to hold free and fair elections has not been met as some candidates were not allowed to register. US operations have until May 31.
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Oil prices fell sharply as the geopolitical risk premium partially unwound as there was no further escalation of tensions in the Middle East and relations settled. Also the larger-than-expected US inventory build weighed on crude. The softer greenback didn’t provide support with the USD index down 0.4%.

  • WTI is down 2.9% to $82.86/bbl and has started today slightly below this level at $82.79. It fell to a low of $82.55 after the EIA report. WTI breached $84.01 opening up $81.06.
  • Brent fell 3.0% to $87.29/bbl. It had been trading above $89 before the US stock data and then fell to a low of $87.13 following it. The benchmark fell below initial support of $88.28, 20-day EMA, with the next level at $85.27, 50-day EMA.
  • EIA reported that crude inventories rose 2.74mn barrels last week but gasoline fell 1.15mn and distillate -2.76mn. Refining utilisation fell 0.2pp to 88.1%, lower than expected.
  • The US House is planning further sanctions on Iranian oil as part of the Ukraine Bill.
  • Today the US easing of sanctions on Venezuela expire and it has decided not to reinstate them, as the condition to hold free and fair elections has not been met as some candidates were not allowed to register. US operations have until May 31.