At around lunchtime London time, we saw oil prices take a dump after Al Arabiya (again) reported that Pakistani army chief was on his way to Tehran. This was yet another daily optimistic headline emerging just ahead of the open on Wall Street. Lo and behold, this was later denied by Pakistan’s Foreign Minister saying he was "not aware of any visit" to Iran planned by the Army Chief, as reported by CBS. Oil went back up to turn flat on the day. The crude oil outlook is thus highly uncertain but with no deal insight, the risks remain tilted to the upside.
Fake news on oil dominates agenda
The latest false reporting of the news follows a similar pattern from yesterday when crude oil prices traded in volatile fashion as markets attempted to navigate a stream of conflicting headlines surrounding possible US-Iran negotiations. Early reports yesterday from Al Arabiya suggested that a Pakistani-mediated agreement between Washington and Tehran had reached the final draft stage, briefly fuelling hopes of easing geopolitical tensions and potentially softer energy prices. However, those reports were later dismissed as fabricated, quickly reversing sentiment across the market.
Further uncertainty emerged after a senior Iranian official stated that no formal agreement had been reached, although negotiations had reportedly narrowed some of the key differences between the two sides. Iran’s uranium enrichment programme and control over the Strait of Hormuz remain central sticking points in the talks, underlining how fragile the diplomatic process still appears.
Adding more caution for investors, another report suggested that Iran’s Supreme Leader had no intention of transferring enriched uranium stockpiles outside of Iran. The combination of contradictory headlines once again highlighted just how sensitive oil markets remain to developments in the Middle East, with traders reacting sharply to every incremental update.
Thursday was another choppy session for crude oil as prices oscillated in wide ranges with traders responding to every single headlines. Some of those headlines turned out to be fake news and by the end of play more questions remained than answers, even if the two sides apparently narrowed their differences on many points. The main sticking points remain the Strait of Hormuz and uranium which Iran, understandably, doesn’t want to hand over to anyone. But with Trump’s insistence of taking the enriched uranium from Tehran somehow, it is difficult to see how the two sides will narrow their differences on these two important matters.
Enough is enough: markets want to see real progress now
Investors are getting tired of all these conflicting reports that have made trading certain markets close to impossible for many. They want to see real action now and not any more vague messages from Trump or fake headlines from certain news wires.
The only deal that looks possible is a temporary one, which could see the start of Hormuz reopen for a limited time as the two sides discuss a full agreement. But currently even that seems difficult to achieve.
But with the long weekend approaching for UK and US investors, we could see some de-risking again as traders will not want to be caught offside next week. This should keep the markets in a defensive mode today, barring a major breakthrough in negotiations.
-- Written by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R
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