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Crude Oil Price Analysis: Bullish Oil Signals as Iran's Oil Loadings Drop

Crude Oil Price Analysis: Bullish Oil Signals as Iran's Oil Loadings Drop

Justin McQueen, Strategist

Oil Price Analysis and News

  • Iran’s Crude Loading set to drop below 70mln barrels, lowest since April 2017
  • Brent Crude Backwardation Returning
  • Beware of DoE for Short Term Move

For a more in-depth analysis on Oil Prices, check out the Q3 Forecast for Oil

Oil prices are a nudge higher this morning, with Brent crude futures back above $76 a barrel, dismissing yesterday’s slightly bearish API report as focus turns to Iran. Reports from WSJ stated that Iran’s crude oil and condensate exports in August are set to drop below 70mln bpd for the first time since April 2017, ahead of the second round of US sanctions on November 4th. This consequently suggests that countries are indeed following the United States demands in regard to reducing Iranian oil imports. However, seasonal factors is also likely to have played a part in the drop in crude loadings, with August typically seeing fewer exports than any other month.

Brent Crude Backwardation Returning?

As markets edge closer to the November 4th deadline, the front end Brent curve contango has been decreasing, pushing the curve towards backwardation, which could see a further corrective move higher in the Brent benchmark. As such, this may see Brent back towards the high 70s as Iranian oil exports feel the bite from looming US sanctions. Alongside this, IEA Chief Birol noted that the oil market will likely tighten towards the year end due to strong demand and uncertainty over production in Venezuela and Iran.

Beware of US inventory data

Yesterday saw a slightly bearish API crude inventory report in which crude stockpiles rose 38k vs. expectations of a drop of 700k. As such, eyes for a short term move in oil will be on today’s DoE crude inventories, which may also show a build following yesterday’s API data. Expectations are for a drop of 690k.

Brent Crude October-November spread

Crude Oil Price Analysis: Bullish Oil Signals as Iran's Oil Loadings Drop

Source: Thomson Reuters

OIL PRICE CHART: Daily Time-Frame (January 2018-August 2018)

Crude Oil Price Analysis: Bullish Oil Signals as Iran's Oil Loadings Drop

Chart by IG

Oil prices have consolidated around the $76.50 mark. Support is situated at $76.05 (23.6% fib of 61.67-80.49 rise). On the upside, the descending trendline from the YTD peak sits at $78.

What Does Current IG Client Positioning Suggest About the Next Move in Crude Oil?

Recent changes in sentiment warn that the current Oil - US Crude price trend may soon reverse higher despite the fact traders remain net-long.

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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