Geopolitical events yesterday included developments overseas and domestically which, combined, may bode well for U.S. consumers as WTI gained just 10 cents to close on the NYMEX at $102.93 per barrel. Brent closed down $2.53 per barrel to $118.68 and that narrowed the gap between the two to $15.31 per barrel, the narrowest differential since Feb. 28, according to Bloomberg.
Early in the day Brent crude and West Texas Intermediate both declined following the announcement that 10 hours of "constructive" negotiations in Istanbul between Iran's delegation and the U.N. Security Council's five permanent members yielded an agreement to meet for a second round of discussions on May 23 in Baghdad.
It should be noted that Israeli Prime Minister Benjamin Netanyahu criticized the negotiations for giving Iran what he called "a freebie"...more time to continue enriching uranium, the process necessary to produce fuel for a nuclear bomb.
Most analysts believe the negotiations represent a step forward and even small steps toward a solution can greatly impact crude oil prices. "Without the Iran premium, between $90 and $100 would appear to be a fair value for WTI," said David Lennox, an oil analyst based in Sydney, Australia.
Later in the day, WTI advanced slightly on the news that the Seaway crude oil pipeline is moving up the date on which it will reverse its direction.
Enbridge and Enterprise Partners, the two firms managing Seaway's reversal said they plan to switch the flow of crude ahead of schedule, on May 17th, so more crude can flow south from Cushing, Oklahoma to the U.S. Gulf Coast. They had previously planned to change the pipeline's flow on June 1. The reversal is expected to alleviate a glut of crude at Cushing, the hub for the mid-continent.
By reversing the Seaway pipeline and shipping more oil to the Gulf Coast, more refineries will have access to cheaper oil. Inevitably, the move will alleviate Cushing inventories that currently stand at 40.6 million barrels, the highest level in 11 months according to the Energy Dept.
Clearly, these two disparate developments impacted global crude oil prices and the results just may bring some calm to a spring season, that, to date, has been characterized by refining challenges and reductions, and, severe retail price volatility.