Iran

U.S. President Trump said he has instructed the Navy to shoot down Iranian gunboats that harass their ships, reigniting the tensions between the two nations...

Going into the weekend, some market participants will be wondering whether more Middle East drama will unfold over the next couple of days, and if so, what might that mean for their open positions.

The first insight into how the oil industry is doing will come from oil services firm Schlumberger on Friday.

Keep an eye on the gap from early May between 110.90/111.00!

Crude oil and gold both fell further and stocks rallied after the US President made no mention of military action against Iran and called for peace.

After spiking again on the back of the Iran’s retaliatory attacks on air bases housing US forces in Iraq, gold and oil prices have now turned to their levels from the day before.

Middle East tensions escalated. And they could come mightily close to taking the lift.

This is simply because China is the world’s second largest economy and a massive market for European and US exports.

That USD/JPY has held support despite a flurry of negative news over the weekend could be a sign of strength over the near-term. Yet with price action suggesting it topped out late December, the pair could break to new lows after a corrective bounce.

Middle East tensions continued to flare over the weekend, resulting in some impressive gaps to further underscore the risk-off start to 2020.

Most analysts seem to lean towards Iraq becoming the proxy battlefield for a conflict between Iran and the US...

When we see asset correlations break down, we need to ask ourselves why!

Last week, West Texas Intermediate (WTI) crude oil traded down to 63.70 intraday, the same level it was trading at in early January.

The primary market themes for the past week have been weaker-than-expected inflation pressures, a surge in the energy sector due in part to a planned US withdrawal from the Iran nuclear deal, and a partial reduction in geopolitical risk concerns due to North Korea’s apparent display of cooperation in releasing hostages ahead of US/NK June talks.

Crude oil turned volatile on conflicting reports about Iran deal earlier today, with US President Donald Trump set to announce his country’s decision in just over an hour at 19:00 BST.

Crude oil prices have been unable to build on the large gains made during Monday’s sessions. Those gains were driven by increased concerns over the potential restriction of Iranian oil exports after Israeli Prime Minister Benjamin Netanyahu accused Tehran of having a secret plan to build nuclear weapons.

After an uninspiring couple of weeks, oil prices looked to be finally on the move this week: both crude contracts were trading higher for the third consecutive day. However, oil prices had eased off their best levels at the time of this writing, presumably because of profit-taking amid the lack of clear direction from the macro front, and ahead of the US jobs report on Friday.

Headline-driven crude oil prices have been fluctuating dramatically in the past few weeks as energy traders have been bombarded with various remarks and innuendos from OPEC nations regarding the organization’s proposed deal to cut oil production and boost prices. Formal OPEC talks will take place on Wednesday in Vienna, after which it should finally be revealed if a satisfactory deal was agreed upon or not. The implications of the meeting outcome are extensive, as the success or failure of a production deal will not only impact crude oil prices, but also global equity markets and the Canadian dollar.

Crude prices jumped in reaction to the latest weekly US crude stockpiles data but then quickly went into reverse gear, before bouncing back once again. Traders were in no mood to take any chances ahead of the conclusion of talks between the OPEC and non-OPEC members in Algeria, especially given how headline-driven prices have become.

Ahead of next week’s talks in Algeria, Reuters reported this morning that Saudi Arabia is apparently willing to reduce its oil output for as long as Iran agrees to freeze its production at current levels.

Sunday’s meeting of crude producers in Doha ended without any agreement to curb oil production. The reaction of oil prices has been logical: a six per cent gap down at the open overnight. Oil prices have since rebounded strongly off their lows, in part due to short covering. Clearly, many people were surprised that after so much talk, a 'freeze' deal, which had looked imminent last week, failed to materialise. At the end, Saudi Arabia’s position to maintain market share was the reason talks collapsed as it wanted all major non-US producers – in other words, Iran – to be part of any freeze deal. But I wonder how such a deal would have changed the fundamentals in any way. As Oman's oil minister said, many oil producers with the exception of a few such as Iran are already at peak production capacity anyway. A deal to freeze oil production at these peak levels would therefore not have helped to immediately reduce the supply glut significantly quicker than would be the case now. In fact, one could argue that by maintaining the status quo and with oil prices being notably higher than back in January and February, there was less motivation for the Saudis to compromise as they can afford to play out their strategy of driving weaker US shale oil producers out of business. Now that US oil output is finally responding to the significantly weaker oil prices, the market can, over time, re-balance itself anyway without the need of intervention from the OPEC and Russia.  That being said however, a deal to freeze production could have sped up the rebalancing process slightly.

This week’s mixed-bag UK economic data has caused the pound to fall against most major currencies, including the Canadian dollar which has managed to perform well recently despite the increased volatility in crude oil prices. The relatively strong performance of the Canadian dollar of late suggests that a bottom in crude is either in place or very close, or that the effects of oil price drops are dissipating. But it could also be due to the non-resources sector of the Canadian economy, which has performed well recently as acknowledged, for example, by the Bank of Canada.