Crude oil WTI set for a correction as Iranian deal could be priced in
- According to analysts the odds of the US renewing the current Iranian deal are very small.
- The market might have priced in the Iranian deal issue as the market looks ripe for a correction.
Crue oil West Texas Intermediate (WTI) is trading at around $67.25 a barrel down 1.63% on Tuesday as market participants seem to have priced in a US withdrawal from the Iranian deal. The downtick in oil was compounded by a strong US dollar demand.
On Monday, Israeli Prime Minister Benjamin Netanyahu claimed to have top-secret documents that revealed Iranian nuclear plans. However, it turned out that the information was already known by the International Atomic Energy Agency and experts said that no new information had been provided. Netanyahu’s real objective was to convince Trump “to do the right thing” and have a tougher stance on Iran, according to analysts familiar with the matter.
It looks like the Iranian deal is priced into the price of oil which is repeatedly failing to break out above the 69.00 resistance and a pullback down might be on the cards.
Interestingly, Brian Gilvary, CFO at BP said that current oil prices are looking “frothy” and referring to the Iranian deal he said, "geopolitics is now playing into where the price is and so I think you could see an oil price correction quite comfortably." In other words, if the market has already priced in the Iran risks or, to a certain extent, after the May 12 deadline, the market might have a relief rally materializing into the correction that Brian Gilvary talks about.
Crude oil daily chart
The trend is bullish, however, a correction down might be underway. The key pivot level to watch is the 67.30 followed by 66.55 previous swing high as support. To the upside, the 68.30 supply zone and the 69.00 figure are potential levels of resistance.