Oil Price Fundamental Daily Forecast – Supported by Rising Middle East Tensions

James Hyerczyk
With tensions running high in the Middle East, look for prices to remained underpinned going into the week-end. There are many supply risks at this time and with the U.S. deploying a sizable military force in the area, there could be a serious conflict with Iran should the rogue nation do something to U.S. forces in the region.

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher shortly before the U.S. opening on Friday. The markets are also on track for their first weekly gains this month, while moving into a position to challenge their highs for the year. Fears of supply disruptions, fueled by rising tensions in the Middle East, are the catalysts behind the strong gains.

At 10:50 GMT, July WTI crude oil is at $63.66, up $0.60 or +0.92% and July Brent crude oil is at $72.97, up $0.35 or +0.48%.

Escalation of Middle East Military Activity

According to CNBC, “A Saudi-led military coalition in Yemen carried out several air strikes on the Houthi-held capital Sanaa on Thursday after the Iranian-aligned movement claimed responsibility for drone attacks on two Saudi oil pumping stations earlier in the week.”

U.S. Middle East Activity This Week

Citing “very real” threats coming from Iran, U.S. President Trump ordered the deployment of an aircraft carrier group, B-52 bombers and Patriot missiles to the Middle East. Staff were also evacuated from the U.S. embassy in Baghdad.

Trump also told his top advisors he does not want to get the United States involved in a war with Iran, three U.S. officials said on Thursday.

U.S. Energy Information Administration Weekly Inventories Report

On Wednesday, the EIA reported that U.S. crude stocks rose unexpectedly the week ending May 10 to their highest since September 2017. Crude stocks swelled by 5.4 million barrels, surprising analysts who had expected a decrease of 800,000 barrels. Gasoline stockpiles, however, decreased more than forecast, according to the EIA.

IEA Cuts Oil Demand

Also on Wednesday, the International Energy Agency in its latest report, cut oil demand growth estimates for both 2018 and 2019. Last year’s oil demand growth estimate has been revised downward by 70,000 barrels per day (bpd) to 1.2 million bpd, while the forecast for this year was cut by 90,000 bpd to 1.3 million bpd, the IEA said.

Daily Forecast

With tensions running high in the Middle East, look for prices to remained underpinned going into the week-end. There are many supply risks at this time and with the U.S. deploying a sizable military force in the area, there could be a serious conflict with Iran should the rogue nation do something to U.S. forces in the region.

Secretary of State Mike Pompeo also said last Sunday that all options, military and otherwise, were on the table in case Iran “makes a bad decision.”

This article was originally posted on FX Empire

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