Market Report & Analysis for 5/8/2018 Morning Edition

Morning Market Overview

Oil prices put in a solid week of trading irrespective of the above normal level of volatility coming from the external markets, mixed signals on the fundamentals side but supported by rising tensions in the Middle East.

The main geopolitical situation bubbling in the Middle East last week is whether the US will walk away from the Iranian nuclear deal and re-impose stringent sanctions on Iran. The likelihood of the US walking away from the deal increased last week after the Israeli’s indicated they have proof that Iran lied about their nuclear situation prior to signing the original deal with the US and other western countries.

For most of last week the evolving geopolitical risk offset weaker equity markets, a rising US dollar and a build in total US combined stocks of crude oil and refined products. When the dust settled crude oil, prices ended the trading week at the highest level since Nov 2014.

This coming week the EIA will lead off the monthly oil projection reports with the release of the Short Term Energy Outlook on May 8 with the IEA report due out on May 16 and OPEC’s assessment out on May 14.

The market will be looking very closely at how global supply and demand balances are evolving and if global inventories will remain in a destocking pattern. That said how the situation with the Iranian nuclear deal evolves over the next few weeks could easily offset either bullish or bearish news from the monthly oil projection reports.