Volatility persists in crude oil complex while sentiment remains bullish

Crude oil futures were slightly down in early afternoon trading June 22, with strong demand expectations supporting prices above the $70/b mark, while political factors and peripheral markets' trends added to price volatility.

At 11:39 GMT, the August ICE Brent contract was trading 40 cents/b below the previous settlement at $74.50/b while the light sweet NYMEX July contract was down 46 cents/b at $72.63/b.

In the aftermath of Iranian election and decreasing likelihood of a spike in Iranian oil hitting the international markets, crude oil prices trended higher with the effect still holding.

The Euro weakened marginally by 0.23% against the dollar on the day, which could have added some pressure to the oil prices.

Considering equities, the S&P 500 index was up 1.40% on the day, reflecting the US market. However, Eurostoxx 50 -- an indicator of European equities -- was marginally lower by 0.31% on the day. The signals were mixed as commodities markets often track the sentiment in equities.

Volatility in oil prices was seen increasing on the day as CBOE crude oil volatility index, OVX, rose 3.12% from the June 21 market close. This largely reflected the swings observed over the past few days due to a combination of bullish demand sentiment and political developments globally.

"Any price movements right now are just too noisy to attribute causation to a single factor," Ron Smith, BCS global markets' senior oil and gas analyst, said.

According to Smith, OPEC+ is yet to signal any supply increase, which further contributed to bullish sentiment, however, he does expect a decision on that front in the upcoming OPEC+ meeting in July.

"I would be very surprised if OPEC+ doesn't communicate some sort of increase for August or September production," Smith added.

A speculative support was also visible, with institutional investors increasing their net long positions in Brent on the ICE by 18,000 to over 296,000 contracts in the week to June 15, and their net long positions in WTI by 11,000 to over 382,600 contracts, according to Commerzbank's report.