Chapter 16 06/08 WTI: Is an Interim Iran Nuclear Agreement Imminent? One Stone Stirs Up a Thousand Waves
Summary: Iran and the U.S. are close to reaching an interim deal to ease some sanctions on Iran in exchange for a reduction in Iran's uranium enrichment activities, two sources said.
Fundamentals
According to an Iranian official and an individual familiar with the negotiations, the talks are taking place directly on U.S. soil, marking a notable development in the diplomatic process. However, they said the U.S. side remains reluctant to rejoin the nuclear deal reached in 2015.
Sources state that substantial progress has been made in the negotiations, and both parties have agreed to a provisional accord. Under the terms of the agreement, Iran would commit to ceasing uranium enrichment activities with purity levels of 60% or above, while continuing to cooperate with the International Atomic Energy Agency for supervision and verification of its nuclear program. In exchange, Tehran would be allowed to export up to 1 million barrels of oil per day and have access to its foreign earnings and other frozen funds.
Upon hearing the news, the prices of WTI crude oil and Brent crude oil experienced rapid short-term declines. The intraday drop in WTI crude oil widened to 3.63%, currently trading at $69.16 per barrel. WTI, being the most active crude oil futures contract on NYMEX, saw a trading volume of 7,012 contracts within one minute, with a total contract value of $489 million.
The significant drop in oil prices is expected to help control U.S. Treasury yields as they reflect expectations of decreased demand. Additionally, lower energy prices will contribute to curbing inflation, providing a rationale for the Fed's decision to pause rate hikes.
Technical Analysis
WTI crude oil has been trading sideways within a range after failing to sustain its bullish momentum during the day. However, a major bearish event caused prices to sharply decline from around $72.80. As a result, crude oil prices have returned to the middle of the trading range, indicating bearish pressure.
After breaking below a key support level, with the 100-day SMA falling below the 200-day SMA, the path of least resistance is confirmed to be downward, potentially opening up further downside potential. Therefore, going short at highs is recommended.
Trading Recommendations
Trading Direction: Short
Entry Price: $70.00
Target Price: $65.50
Stop Loss: $74.70
Valid Until: 2022-06-22 23:55:00
Support: $69.92, $68.05, $67.09
Resistance: $72.39, $73.80, $74.33
