Trading is tepid today after bullish geopolitical news sparked weekly gains across the board. Technically, the market is extremely overbought, but the computers may be apprehensive to sell until any of the following issues are resolved.
Venezuelan crude oil production continues to decline as the country is battling political turmoil and an economic crisis. Barclays announced that Venezuelan crude oil production could fall below 1 million barrels per day after it produced around 1.5 million barrels per day just last month. Fellow OPEC member Iran has also been a constant bullish headline. Investment bank Jefferies says that after the U.S. pulled out of the Iranian nuclear deal, it could effectively remove 1 million barrels per day of oil production off the market because Iran won’t be able to sell it. The only shred of bearish news to the Iranian story is that Russian President Vladimir Putin and German Chancellor Angela Merkel met today to discuss how Europe could keep the Iranian nuclear deal intact.
Nigeria, another OPEC member, is also causing bullish headlines with the latest pipeline disruption. Reuters reports that Shell declared force majeure yesterday on the loading of Bonny Light crude oil. This could prevent up to 200,000 barrels a day of fuel from being exported if it persists.
Obviously all of these headlines are driving forces behind this week's rally as Brent crude prints $79.30/barrel, just below the psychological level $80/barrel. Therefore, any alleviation in the fundamental constraints listed above, may motivate the computers to sell. But, until that time, it appears to be a "buy the dip" market, especially as driving season kicks off next weekend for Memorial Day.
June WTI currently trades lower by $0.04 to $71.45/barrel, RBOB trades higher by $0.0060 to $2.2491/gallon and ULSD is unchanged at $2.2808/gallon.