Beware the Tweet. It will prop up oil prices temporarily by alluding to imminent disaster in the Middle East, where disaster is and always has been imminent. But it has no legs.
The boost oil prices received on Thursday, to bring them safely out of negative territory and into the $20 fold, will be fleeting without anything short of an actual war. The price boost was the result of a Tweet in which Trump vowed to shoot down Iranian gunboats if they attempted to harass the U.S. Navy again, in response to an incident last week. We’ve seen these sudden - and temporary - price increases before on far more tangible Middle East unrest.
Reeling from negative oil prices, oil sentiment is looking for absolutely anything to latch onto, so even a short-term price bump looks good in the absence of anything else.
The thing to watch, though, isn’t Iran. It’s the June WTI futures contract, which expires on May 19th. The prices are holding steady for now - under the new normal - largely in line with spot prices for WTI. Vacuous price forecasts for WTI now range anywhere from -$100 to $100 per barrel.
Several developments to watch this coming week include a possible U.S. ban on imported Saudi oil, the Texas Railroad Commission’s vote on whether to implement production cuts for Texas oil producers, government funds for the oil industry, and OPEC’s potential additional production cuts beyond the current agreement.