Oil in the spotlight as geopolitical tensions rise

Summary:

  • US-Iranian tensions escalate but Oil uptrend could be coming to an end
  • EIA inventories at 3:30PM. API last night +2.8M
  • ITV shares swoon on falling ad revenue 

An already tense situation has been ratcheted up a couple more notches by the announcement that Iran will stop honouring some of its commitments under the nuclear accord in what is clearly a retaliatory action in response to the US seeking to end oil sanction waivers. For the time being the markets don’t seem to worried with the price of crude oil drifting lower in recent sessions, but this sort of geopolitical risk can escalate rapidly and with the US recently deploying an aircraft carrier to the Middle East this situation will be high on the radar of oil traders.

After a strong run higher there is some suggestion that the trend could be turning lower for Oil with the 8 EMA on the verge of crossing below the 21. The 23.6% fib of the advance could be seen as key support around 69.00 but a clean move below there would open up the possibility of a larger pullback to the 38.2% fib at 65.47. Source: xStation

 

Another supply side issue is US production and this afternoon we get the latest EIA inventory figures released which are expected to show a 5th build in the last 6 weeks. The private API numbers are often seen as a precursor to today’s government numbers, and last night saw a reading of +2.8M for the week ending May 3rd. As far as the demand side of the market is concerned there’s also significant geopolitical risk, with the US-China trade tensions and the adverse impact that further levies would have on global growth causing brent crude to open sharply lower on Monday. The benchmark has been one of the best performing assets so far this year, but there is some suggestion that after a rally of around 35% price is due a pullback, with the technical situation suggesting the uptrend could be coming to an end. Having said that, tensions between Washington and Tehran pose a very supply side risk and any significant further escalation could well cause a sharp move higher with the 2018 peak of around $86 not out of the question as far as upside targets go.

 

ITV drops 4% on weak ad demand

The worst performing stock on the FTSE this morning is ITV, with shares in the broadcaster falling by as much as 4% after it announced a disappointing trading update. A 4% fall in total revenues to £743M is largely due to advertising revenues declining by 6% with Brexit, a lack of World Cup football and the timing of Easter all blamed. While it is possible that each of these could have played a part, they do appear to be easily rolled out excuses with the bigger issue being the ongoing shift in consumer habits towards on demand viewing and away from traditional channels.

ITV shares continue to languish near their lowest level since 2013 around the 1.2150 mark with the market falling 4% this morning after the latest disappointing trading update. Source: xStation    

 

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