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Oil Prices Pegged Back by Profit Taking After Early Gains

May 10, 2018 at 16:15 by Matt Jackson

Oil prices looked like they were continuing their powerful march upwards in early trading on Thursday, but were pegged back by profit taking later in the day, to finish slightly down on Wednesday’s prices. WTI has still settled above $71 and Brent above $77. It looks likely that oil will see its biggest weekly gains in a month and market observers have said that the rally is likely to continue, after investors have finished taking profits.

The Iran nuclear deal has taken the majority of column inches recently. As was widely predicted, US President, Donald Trump, pulled out of the Joint Comprehensive Plan of Action (JCPoA) and threatened new sanctions on Iran and those that do business with them. While the news was expected, it still caused a big rise in oil prices, especially during Wednesday’s trading. The rise continued on Thursday morning, further buoyed by Middle East tensions.

According to Israeli sources, Iranians attacked positions in the Golan Heights. This action led to Israeli forces carrying out air strikes on dozens of Iranian targets in Syria.

This combination of geopolitical matters led to early oil price rises on Thursday morning. WTI crude peaked at $71.66, while Brent crude rose to $77.72. However, the spike in prices was met with profit taking by investors, pegging prices back. WTI crude oil was trading at $71.07, a decrease of 0.1%, while Brent crude fell 0.14% to $77.10 at 16:30 GMT.

The expected backlash against Syria also saw energy stocks across the Asia-Pacific region rising with gains of more than 2% for the Sydney S&P/ASX and Tokyo’s Topix energy sectors.

Trump has said that he will enact the highest level of economic sanctions against Iran, and has also said that countries that still deal with them will face tariffs of their own. While the UK, France, and Germany have said that the deal does not have to die with Trump’s withdrawal, it has a difficult future ahead of it that will likely lead to a lot more oil price action.

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