Daily Market Recap – USOIL The price of oil falls as negotiations with Iran progress

Oil prices have been under pressure since Tuesday after hitting a high of $67. The price of oil is being hurt by a combination of recent factors, the latest one being the progress of the Iranian nuclear talks, which have entered the fifth phase.

The week had started well for crude oil prices: the Brent and WTI contracts even reached $70.24 and $67.01 on Tuesday during the session, the first time this had happened since March 8.

But a cocktail of bearish arguments got the better of this surge on Wednesday.

First, the increase in U.S. crude oil inventories during the week noted Wednesday by the U.S. Energy Information Agency (EIA), of about 1.3 million barrels.

Then the fears of a resumption of Asian demand disrupted by the renewed strength of Covid-19, in India for several weeks but more recently in Taiwan or Malaysia.

Finally, the positive news on the Iranian nuclear front has weighed on the price of crude.

The European Union's top negotiator said Wednesday that he was “almost certain” that a final deal would be reached to revive the 2015 agreement on Iran's nuclear program but said he could not indicate whether a deal will be reached in this fifth phase. The Russian envoy taking part in the talks also expressed optimism via Twitter.

The success of the negotiations would lead to the lifting of U.S. sanctions against Tehran and consequently, an increase in Iranian oil supply on the market. 1.5 million barrels per day could eventually return to the markets with the simple lifting of U.S. sanctions (Iran currently produces 2.5 million barrels of oil per day compared to 4.0 million before the sanctions).

From a technical analysis standpoint, the outlook for WTI oil is turning bearish as the price of the barrel has not only broken out of the bottom of the uptrend channel it has been in since early April but is also breaking out of its range at the bottom.

(Chart Source: Tradingview 20.05.2021)

For now, buyers have lost control, but they could come back with a vengeance if WTI oil returns to test its late April low of around $60.60. A pullback below this level and below the symbolic $60 mark would pave the way for a continuation of the correction to the March/April low of around $57.40.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.