Oil prices have fallen since the release of worse than expected US oil inventory figures on Wednesday but the potential for the Iranian situation to worsen during the course of the IAEA meeting currently underway is keeping oil market participants wary.
Oil markets sentiment remains dominated by the escalation of attacks in Nigeria.
Paradoxically, the price strength of the past couple of days makes a production cut ... less likely, ... If OPEC does cut production it will be reacting to perceived weakness in market fundamentals later on this year.
It's only a matter of time before geopolitical developments give the market another sharp tug. The chances of a benign settlement in coming months over the Iranian nuclear issue have receded in recent weeks.
US product markets remain extremely weak at present, with most of that weakness focused in gasoline markets.
The catalyst for the move higher appears to have been the release of a weather forecast drawing attention to the likelihood of another cold winter, prompting a surge of buying interest in winter fuel markets on both sides of the Atlantic.
With plenty of crude oil available to the market at present and some OPEC members signaling that lower oil prices may be acceptable to the group, the stage may well be set for further tests of support over the coming weeks.
There's still going to be concern about potential hurricanes in the market for a few months. Crude output and refining are so tightly stretched that you don't need a big disruption to put the system under a lot of pressure.
Markets have already priced in a fairly sizeable production cut.
If it weren't for the market's focus on short-term inventory data, the market would be a lot higher. We're retracing, even if the move upwards was not as big as it could have been.
People were expecting builds across the board. On that basis the market reaction that we have had is not surprising...It looks like product strength has the potential to return.