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Crude oil futures closed little changed on Tuesday despite fears of escalating hostilities in the Middle East, with US officials reportedly expecting Israel’s response to Israel’s unprecedented missile and drone attack Iran will be limited in scope.
Analysts also believe in the strike AND it is unlikely to result in dramatic sanctioning actions on Iranian oil exports by the Biden administration due to concerns about rising oil prices and anger from major buyer, China.
Meanwhile, strong U.S. retail sales in March are reinforcing expectations that the Federal Reserve won’t start cutting interest rates before September, a generally bearish signal for oil as higher rates are believed for a longer period damage the question.
Recent stronger-than-expected inflation data means the Federal Reserve will likely need more time than previously thought to be sure inflation is on track to 2%, Fed Chair Jerome Powell said Tuesday .
Front-month Nymex crude (CL1:COM) for May delivery is out -0.1% at $85.36 a barrel, and June 1 Brent crude (CO1:COM) also closed -0.1% at $90.02/barrel.
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Despite the geopolitical tensions, Tom Kloza, global head of energy analysis at OPIS, sees the next big move for oil, perhaps $10 a barrel, as “down, not up.”
“As time goes on, it becomes more and more dangerous for speculators, money managers and commodity funds to be long oil” and reformulated gasoline, Kloza said Marketwatchalso noting a “very strong tradition” of prices peaking in April or early May.
Kloza said he expects to soon see a “range and normal pullback” of about 15%, which will remove more than $10 a barrel from the price of crude oil and $0.30 to $0.50 a gallon from gasoline futures.