WTI tumbles as US-Iran nuclear deal looms, offsets OPEC+ output cut

Western Texas Intermediate (WTI), the US crude oil benchmark, dropped sharply during Thursday’s North American session, courtesy of an “unconfirmed” report that the United States (US) and Iran may be near a temporary nuclear deal, which could unblock sanctions imposed by the US on Iran oil exports. WTI is trading at $70.38, below its opening price by 2.82%.

US crude benchmark plunges amidst rumors of potential Iran sanctions relief

According to Reuters, “Oil fell on a news report, citing sources, that Iran and the US are nearing a temporary deal that would trade some sanctions relief in exchange for reducing Iran’s uranium enrichment.”

If Iran agrees to reduce its uranium-enriched development, it could export up to a million barrels of oil daily and access frozen funds abroad.

WTI’s fall was cushioned by over-the-weekend developments with the Organization of Petroleum Exporting Countries and its allies (OPEC+) meeting on Sunday, with Saudi Arabia agreeing to cut its crude oil output by 1 million barrels per day (bpd) in July, as the cartel tries to boost oil prices.

Another factor that capped WTI’s fall was stockpiles in the US dropped last week by 451K barrels on June 2, as reported by the US Energy Information Administration (EIA). The markets expected a rise of 1M barrels per day.

Notably, the greenback posted several losses after a labor market report indicated that unemployment claims in the United States (US) rose above estimates. After the data, the consensus amongst investors that the US Federal Reserve (Fed) will skip increasing rates at the June meeting weakened the US Dollar. The US Dollar Index (DXY) is down 0.67%, at 103.347.

WTI Price Analysis: Technical outlook

WTI remains neutral to downward bias, yet still below the 20-day Exponential Moving Average (EMA), the first resistance at $71.86. Oil will continue its downtrend past that area and can challenge 2023 year-to-date (YTD) low of $63.61 if sellers claim the May 31 low of $67.08. It should be said that oscillators justify further downside, but if WTI breaks above the 20-day EMA and clears the 50-day EMA at $73.3s5, that could pave the way for further gains.