Meanwhile, analysts predict another drop in U.S. crude stockpiles: File Image/Pixabay
If crude trading sessions earlier this week demonstrated that analysts seem determined to interpret everything in a negative light regardless of the news, trading on Tuesday showed that factors normally regarded as good news from a geopolitical perspective usually spell trouble for oil prices depending on one's view.
Based on remarks made by U.S. president Donald Trump at a White House Cabinet meeting that a lot of progress has been made with Iran and he is not looking for a regime change in the country, Brent on Tuesday fell $2.56 to $63.86 per barrel, while West Texas Intermediate fell by $2.46 to $57.09 per barrel.
In the complex dynamics of the crude industry, any price drop is good news for Trump, who has famously crusaded to give American motorists a break at the pump, but bad news for Middle Eastern producers and other countries who prefer oil to be in the $70-$80 range in order to support their ailing economies.
PVM Oil Associates
Bullish catalysts are in short supply
Trump's remarks to Cabinet were augmented by Mike Pompeo, U.S. secretary of state, who said at the same meeting Iran was prepared to negotiate about its missile program; the Islamic Republic's foreign minister seemed to corroborate Pompeo's claim.
Bob Yawger, director of energy futures at Mizuho, pointed out that the same tensions between the U.S. and Iran that had driven prices higher earlier in the session were putting a damper on the market after Trump's comments: "What were tailwinds have become headwinds."
More importantly, there still doesn't seem to be any clear sign that crude could achieve a rally, let alone a sustained one: analysts at PVM Oil Associates said in a note to clients, "Bullish catalysts are in short supply.
"The Gulf Coast of Mexico hurricane premium is fading as offshore operations in the region resume; at the same time, the U.S. shale engine continues to give oil bulls a sleepless night."
The outages caused by the storm are expected to affect the next tally of U.S. stockpiles, and analysts in a Bloomberg survey predict a 3 million barrel drop in inventories last week - a fifth straight decline - when the government releases the data on Wednesday.
However, given the notoriously poor track record of accurate predictions made by the crude analytical community, it's anyone's guess whether their prognostications will have any effect on trading in the upcoming session.