Looking to the Futures

Crude oil erased its early morning gains on Thursday as optimism surrounding a potential peace deal with Iran sent prices lower for the second consecutive day. Front-month July futures (/CLN26) sank -1.94%, settling at $96.35. With narratives around the conflict seeming to shift by the hour, markets continue to experience the sharp intraday swings traders have recently grown accustomed to.

Early in the session, reports of an intensifying standoff between the U.S. and Iran over key aspects of a deal pushed oil prices above $100 per barrel, with gains exceeding 3% at the stock market open. The rally was driven largely by headlines suggesting Iran’s Supreme Leader would not agree to sending enriched uranium out of the country. However, that move quickly reversed as new developments emerged.

Prices collapsed later in the morning following reports that the U.S. and Iran were closing in on a potential agreement that could restore normal crude flows. According to sources, the latest U.S. proposal has “narrowed the gaps” between the two sides and includes a short-term framework to reopen the Strait of Hormuz and lift the U.S. blockade of Iranian ports. Such measures could temporarily ease energy constraints while negotiations over Iran’s nuclear program continue.

Despite these developments, mixed messaging remains a key driver of volatility. While Washington has stated negotiations are in their “final stages,” Iran continues to maintain that enriched uranium will not leave the country. As a result, crude prices have remained elevated, yet capped, as markets await further clarity.

Fundamentally, supply concerns persist. The International Energy Agency warned this week that oil markets could soon enter a “red zone” as global inventories decline heading into the summer demand season. IEA Executive Director Fatih Birol noted that developing economies, particularly in Asia and Africa, are likely to feel the “biggest pain” from tightening conditions.

Wednesday’s EIA report reinforced this theme, showing U.S. crude inventories at -1.7% and gasoline inventories at -4.6% below their seasonal five-year averages as of May 15. U.S. crude production also dipped slightly, falling -0.1% week over week to 13.702 million barrels per day.

In broader markets, equity futures finished higher, with S&P 500 futures gaining 1.08%, Nasdaq futures up 0.19%, and Dow Jones Industrial futures rising 0.57% to close just below all-time highs. Treasury yields edged lower, with the 10-year declining 1 basis point to 4.564% and the 30-year falling more than 2 basis points to 5.09%, after recently touching its highest level since before the financial crisis above 5.19%. Market focus now turns to further developments on the Iran deal and the expected swearing-in of new Federal Reserve Chair Kevin Warsh on Friday.

 

Natural gas futures (/NGM26) ended Friday’s session lower (–0.43%) as U.S. natural gas storage levels remain ample for this time of year.  

The U.S. Energy Information Administration (EIA) reported U.S. natural gas inventories saw a 63 billion cubic foot (Bcf) build during the week ending May 1. This was below expectations for a 74 Bcf storage build. U.S. gas inventories are currently 6.7% above the 5-year average and 3.5% above last year.

The National Weather Service’s Climate Prediction Center expects temperatures from May 14 to May 20 to be near normal to above normal for all of the lower 48 states. 

Canadian dollar futures (/6CM26) ended the week lower (–0.33%) following the release of weaker than expected employment data on Friday. Statistics Canada reported employment declined by 18,000 in April vs. expectations of a 15,000 jobs gain. The unemployment rate rose by 0.2% to 6.9% in April, which was a six-month high. 

Corn futures (/ZCN26) closed higher on Friday (+0.80%), with the lead-month July contract rebounding from two-week lows made earlier in the week. The USDA reported old-crop corn export sales totaled 1.362 million metric tons during the week ending April 30. This was down 18.1% from the same period last year. U.S. producers have planted 38% of this season’s corn crop as of May 3, which was on par with last year but 4% above the five-year average. 

Major economic reports, trading events, and news items that could potentially impact specific futures markets:

Existing Home Sales for April (interest rates)

10:00 AM ET: Consumer Sentiment (final)

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• Ripple (/XRP)
• Micro Ripple (/MXP)
• 100 OZ Silver (/SIC)
• 1 OZ Gold (/1OZ)
• Solana (/SOL)
• Micro Solana (/MSL)

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