The decision of Donald Trump on the US withdrawal from the nuclear deal with Iran has become a catalyst for the growth of oil prices to their highest level since autumn 2014. Despite the fact that speculators recorded profit on the record net-long for Brent against the background of the principle of "Buy on the rumor, sell on facts ", something else will necessarily come to move the markets. Investors are well aware that the factor of potential production reduction by the second-biggest oil producer to 1.5 million b/d is a more bullish argument than uncertainty over whether the US will return economic sanctions against Tehran or not. And even though the latter is ready to provide its European partners with proof of their innocence, this chance was already missed. If the EU starts any deal with Iran behind Washington, it will receive sanctions already in its address. It's hard to argue with the strong; one needs to agree with them.
Dynamics of speculative positions for Brent
Bulls by Brent and WTI are not at all discouraged by the increase in the number of drilling rigs in the US to 844 (+10 per week by May 11), the highest figure for the last 3 years, nor the record increase in shale production in the largest American fields to 7.18 million b/d in June (the forecast of the US Energy Information Administration). They have adopted a rapid decline in commercial oil reserves in developed countries (OECD). Back in early 2017, the indicator exceeded its five-year average by 340 million barrels, but by April the difference narrowed to a miserable nine million barrels. The market is clearly on the balance sheet due to OPEC's active actions.
In March, the cartel exceeded its Vienna commitment to reduce production by 67%, in April - by 66%. Only the production of oil in Iraq falls short of the terms of the deal that is valid from January 2017, the expiration date of which falls on 2018. However, given the fact that hedge funds and other speculators actively buy options that will be "in cash" (pay off) , if Brent by the end of October will exceed $ 90 per barrel, it can be assumed that the Vienna agreement will be extended. The rate for such a result reached a record level of 21.3 million barrels in oil equivalent.
An important feature of the current situation is the reduction in the correlation between Brent and the US dollar. It is generally believed that the strengthening of the US currency leads to a rise in the cost of imports in the largest consumer countries and contributes to a decline in futures for black gold. At present, oil rally is perceived as a signal to accelerate inflation, which, in turn, will force the Fed to aggressively raise the rate on federal funds. In this connection, it becomes clear why Washington's decision to withdraw from the nuclear deal with Tehran became a catalyst for strengthening the USD index.
The dynamics of WTI and American inflation
Technically, the "bulls" continue to push Brent to the north in the direction of the target by 200% on the pattern AB = CD. While the quotes of the North Sea grade are above support at $ 70.4-71.15 per barrel, total control over it is retained by buyers.
Brent, daily chart
