Crude oil prices settled at nearly four year highs as the clock is winding down on President Trump’s decision on the Iran nuclear deal. Prior to his announcement this afternoon that he would tell the world of his decision tomorrow at 2:00 pm EST, WTI traded above $70/barrel.
Why will the price go higher if Trump decides on new Iranian sanctions? Theoretically, the world’s oil supply would decrease, even with US production at record levels. In addition, Venezuela production continues to drop and its oil output is expected to face further headwinds as VP Pence is supposed to announce new sanctions later today.
However, this may be the classic case of “buy the rumor and sell the news.” We certainly live in a time with numerous geopolitical uncertainties which affect every aspect of our market, but I believe we may have $4-$5 of “run-up” into this announcement. I think we see $65/barrel before $75 barrel.