Market Report & Analysis for 4/24/2019 Morning Edition

Morning Market Overview

New York Mercantile Exchange nearest delivered oil futures and the Intercontinental Exchange Brent contract spiked in early trading following the Easter holiday weekend on speculation the United States will not extend waivers allowing certain countries to continue purchasing oil from Iran.

Reports indicate the United States intends to ramp up maximum pressure on Tehran by driving Iran’s oil exports to zero, with U.S. sanctions targeting Iranian oil exports taking effect in early November.

Late last year, the Trump administration granted eight countries waivers allowing for ongoing purchases of Iranian oil for 180 days. Three of those countries—Japan, Italy and Greece—have since zeroed out their crude purchases from the Islamic Republic and reportedly would not be granted an extension. The five other countries include Iran’s top two customers, India and China, as well as South Korea, Taiwan and Turkey.

Recently, U.S. officials estimated sanctions have taken one million bpd of Iran’s oil exports off the market. Earlier this month, the Organization of the Petroleum Exporting Countries, citing secondary sources, reported Iranian crude production in March at 2.698 million bpd, the lowest output rate since October 2013.

Domestically, the May West Texas Intermediate futures contract expires this afternoon, with June delivery trading near parity with the expiring contract. The front end of WTI futures forward curve has flattened out, with the market inverted beginning with July delivery—a bullish market structure.