Oil Turning Higher Again

After a correction lower from last week’s highs on rising optimism around diplomatic efforts in the Middle East, oil prices are pushing higher again today. The rebound comes amidst the lack of progress in talks between the US and Iran. Iran submitted a fresh peace proposal last weekend which the US has not yet responded to. However, with the Iranian President Pezeshkian telling the UN General Assembly in New York this week that Iran would not concede its rights to develop nuclear technology, the prospect of a deal looks less likely. The US has been very clear in its assertion that any deal must include Iran abandoning its nuclear programme. As such, traders now assign a weaker probability to the current peace terms being accepted.

Unexpected EIA Inventories Build

The rally in crude today comes despite the latest inventories data showing a fresh surge in stockpile levels. The EIA reported a 3-million-barrel build in commercial crude stores last week, up from the prior week’s 0.6-million-barrel decline and in stark contrast to the -0.7 million-barrel result the market was looking for. Despite the rise in headline crude inventories, both gasoline and distillate inventories fell over the same week, falling 1.7 million barrels and 400k barrels respectively. Total distillate inventories now sit around 12% below their seasonal average for this time of year adding some bullish support.

Technical Views

Crude

The sell off in crude has stalled for now into the 88 level with price now rebounding to retest the 95.06 level resistance. While this holds, focus is on a fresh downturn with 84.60 the next bear target. However, if bulls can regain that level, focus will switch back to the 104.26 level next.