Risk level: Yellow - Elevated

RED: Severe (+/- 4%) ORANGE: High (+/- 2%)  YELLOW: Elevated (+/- 1%)  BLUE: Guarded (+/- ½%)

THE BOOSTER SHOT

•             Brent crude oil prices may be tracking toward a new floor this week

•             Wintershall's distaste for political games may be the European tell on JCPOA

•             With the ECB wary of "vulnerabilities," Trump's shifting position may be testing market patience

Iran and the remaining members of the JCPOA agreed Friday to try to salvage a deal left damaged by President Trump's long-awaited pullout in early May, with Tehran lobbying for some form of arrangement by the end of this month. The dilution of an agreement that gave Iran freedom to export more of its oil helped establish Brent crude oil at $80 per barrel. We saw $80 as a ceiling and were validated Friday when the global benchmark settled at $76.16. We expected a week of moderate movements, with a Yellow alert (+/- 1 percent for Brent). The OPEC+ consideration to put more oil on the market in the second half of the year pushed the benchmark lower than anybody could've anticipated, however. In the end, Brent was down 2.9 percent for the week.

The U.S. unilateral departure from the JCPOA may be indicative of a realigning of the geopolitical poles, adding uncertainty to an already unstable market. With Washington's new penchant for unclear and changing paths, from trade to treaties, the European Central Bank warned that "vulnerabilities are building up in global financial markets." New demarcations from Washington, meanwhile, are changing the global map of international order. Wary of the position of the Trump administration, parties remaining in the Iranian nuclear deal - Britain, China, France, Germany and Russia - held meetings of their own to try to salvage a deal that has implications not only for global security, but oil market stability as well.

"We expect the (economic) package to be given to us by the end of May," Iranian Supreme Leader Ayatollah Ali Khamenei said.

Meanwhile, after finding that placating Trump was ineffective, French President Emmanuel Macron has turned to Russia, saying outreach would keep the Kremlin at the European table. German Chancellor Angela Merkel, meanwhile, has stressed the strategic importance of an amicable relationship with Russia. That European pivot could be indicative of a lingering distrust of U.S. policies in the region. While the United States has tried its hand at using energy for political leverage, German energy company Wintershall – which has partnerships with Gazprom – has signalled it was not in the business of playing geopolitical games. While keeping the JCPOA will be difficult for Europe, and while it's a tough choice to make, there may be an appetite for a strict business relationship with Iran.

Without Iran, and with chronic shortfalls from Venezuela, the global oil market is moving toward a deficit. It was left then to Russia's energy minister, Alexander Novak, to take the podium at the St. Petersburg International Economic Forum to lance the bull with suggestions of more oil on the market in the second half of the year to offset the potential for further declines.

The U.S. influence on the market might not be all it's cracked up to be. Testifying before a House committee on foreign affairs last week, Samantha Gross of The Brookings Institution said Trump's vision of energy dominance is misleading. While important to energy security, the United States lacks the ability to move markets directly, she said. That could be a telling statement on influence in general, especially in Europe. U.S. Secretary of State Mike Pompeo has even conceded there was a "huge market" in Iran. While the headlines next week may be dominated by Trump's on-again-off-again love affair with North Korea, it may be the OPEC+ positioning ahead of June meetings and the European bid for autonomy that establishes the base narrative for oil markets.

Brent crude oil is coming off its first weekly loss in a month. Monday trading may be lighter because of the U.S. holiday, but expect some influence from a Norwegian survey of quarterly investments in the oil industry and a rig count hangover. With Trump focused on putting his stamp on North Korean diplomacy, it could the European initiatives driving the short-term agenda on oil.

We expect Brent prices to move lower in search of a new floor this coming week and stick with a Yellow alert as charts establish a new forward slope.