Oil’s four-week roller coaster ride ended with a loss for April, and May looks unlikely to offer a smoother journey.
West Texas Intermediate crude CLM7, -2.31% started the month off strong, with a five-session climb lifting prices to a peak at about $53.40 in by mid April. But a six-day losing streak sent crude back under $49 a barrel Thursday to its lowest close since late March.
Despite the herky-jerky moves, the peak-to-trough represented a range of less than $5 a barrel. WTI settled Friday with a loss of about 2.5%. Brent crude UK:LCOM7 the global benchmark, lost about 3.4%.
DIY Spring Lotion Bars
“Trade Oil in a very narrow range over April as it has for the past four months, so the period has been characterized by low volatility due to even flow of both bullish and bearish developments,” Tamar Essner, director of energy and utilities at Nasdaq Advisory Services, told MarketWatch.
Prices found support following U.S. airstrikes in Syria and Yemen. That raised “the geopolitical risk premium” in the Middle East, which is responsible for more than 30% of the world’s petroleum needs, Essner said.
There were also some expectations that the Organization of the Petroleum Exporting Countries will decide to extend the six-month production cut deal that was implemented at the start of the year. Saudi Arabia voiced support toward extending the cuts.
The cartel plans to make a decision when it meets on May 25.
But crude production in the U.S. has been climbing in the wake of WTI oil’s 45% jump last year, which followed a two-year slump in prices.
Read: Why U.S. oil production isn’t done rising
For the month of May, here are five key factors that are likely to move the oil market, according to Essner:
1) OPEC meeting
“The single most important driver of oil prices in May will be the OPEC meeting,” said Essner. “Rhetoric from all the members, as well as [non-OPEC] Russia, around their commitment to extend the cuts will be market moving over the coming weeks.”
2) Oil company production guidance
“Investors will also look to comments from [exploration and production companies] in the U.S., who will report earnings throughout the month,” Essner said. Investors will be “looking for any additional updates on production guidance for read-through on the levels of U.S. shale growth.”
3) U.S. rig counts and inventory levels
These will “continue to influence sentiment,” said Essner.
She also noted that “seasonally, it should be a strong period for oil prices ahead of summer-driving season in the U.S., but we will need to see that reflected in the data.”
The Energy Information Administration on Wednesday reported a sizable decline in weekly U.S. crude supplies. But it also revealed a hefty unexpected climb in gasoline stockpiles, with the amount of product supplied, an implied demand figure, down 1.8% in the last four weeks from the same time a year ago.
Data from Baker Hughes BHI, -0.37% Friday, meanwhile, showed a 15th straight weekly rise in active U.S. oil rigs, implying further production increases ahead.Trade Oil.
4) Iran’s presidential elections
“Not to be overlooked are the elections in Iran on May 19—before the OPEC meeting,” said Essner.
While Hassan Rouhani, the current president, is largely expected to win, “we are seeing more surprising election results throughout the globe, so investors need to prepare for so-called Black Swan events,” she said. “If we have a hard-liner, this could be bullish for oil insofar as it might cause a re-implementation of sanctions against Iran.”
5) North Korea
The nuclear situation in North Korea will also garner attention in May.
“Given the proximity to oil demand centers, this could prove to be a bearish factor to the extend that Asian economies are affected as regional tensions rise,”said Essner.