The tensions between Iran and the West have been easing as another meeting will take place tomorrow. As such, expect more market participants to pay attention to this week's round of oil inventory data and thus impact price direction.
The fundamentals of oil are becoming more bearish as the inventories continue to build around the globe. The IEA reported last week that OECD inventories are now above the five year average while crude oil inventories in the US are at the highest level going back to the early 90s.
At the moment oil prices are still being mostly driven by the direction of the euro and the US dollar as well as by a view that China's economy is continuing to slow. The tensions evolving in the Middle East between Iran and the West have been easing as another meeting is scheduled for May.
Yesterday was clearly a so called risk-on day as market participants interpreted Spain's better than expected auction results that all is ok in Europe. The markets remain so interlinked that something as simple was enough to drive just about every risk asset market higher.
The oil market was hit with a one-two punch that has sent prices toward the lower end of the trading range. First the latest minutes from the last US Fed FOMC meeting suggested that the Fed may be backing away from QE3.