Oh sure, the talks in Geneva failed to get an agreement but Iran did leave the p5 plus 1 a lovely parting gift. Iran signs a deal with the International Atomic Energy to open up a cat and mouse game with UN weapon or nuclear inspectors bringing back memories of Iraq. Of course the deal falls far short of what the Western nations wanted but in the world of diplomacy it may be a face-saving measure.
Oil (NYMEX:CLZ13) reacted somewhat positively to the deal because, I guess, any deal is better than no deal. Oil pulled back from highs in both Brent and WTI. Of course the hope that this would add about a million barrels of light sweet crude to the marketplace in Europe has been dashed. Still the likelihood of an attack on Iran with weapon inspectors on the ground in three months is very unlikely. So even without a deal the risk premium surrounding a conflict against Iran remains relatively low.
WTI then looks heavy again after failing to rally hard on the Iran nuclear talk setback. There are going to be more meetings with Iran, so the focus is on supply in the murky backdrop of political talks. Iran desperately wants a deal because their economy is in shambles. Yet in the U.S., oil supply at the highest levels since 1930 is weighing on the complex. The failure to launch yesterday means our target of $88 dollars that we gave you weeks ago before the other late coming bears are now predicting is looking very likely.
Products on the other hand look strong. Big drop in inventories and the lack European exports will help support products!