Brent Nears $90 on Conflict Risks
by Bloomberg | Alex Longley, Mia Gindis
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas
Oil settled higher as escalating Middle East tensions fueled supply concerns despite diplomatic efforts.
Oil edged up in a fraught session as traders grappled with a barrage of headlines that suggest a worsening of the Middle East conflict, as well as attempts to bring about a pause in the war.
West Texas Intermediate futures swung in a $5 range before settling marginally higher at around $83 a barrel. Still, that was the highest closing price since mid-June. Brent at one point topped $90 a barrel, before paring.
Yemen’s Iran-backed Houthi rebel group said it would impose a ban on maritime traffic from Saudi Arabia, a potential threat to the Red Sea shipping route that has enabled the kingdom to export millions of barrels a day of crude via a pipeline system stretching across the country. That was after oil tankers and Kuwaiti facilities were attacked by Iran in recent days, bringing energy assets firmly back into the crosshairs of the conflict.
“Crude is leaning heavily into the idea that open diplomatic channels remove the upside tail,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Group. “However, if a ship is targeted in the Red Sea, expect the next leg higher to happen quickly.”
Still, Reuters reported that mediators have suggested a 10-day cessation of strikes between the US and Iran, as a means of finding ways to revive an interim US-Iran peace deal that has all but collapsed, citing an unidentified senior Iranian official. Iran also said mediators were in touch with Tehran about proposals on how to ease hostilities. US President Donald Trump, meantime, vowed that Iran “will pay” for killing three US soldiers in recent days.
In refined products, gasoline and diesel have again climbed above $4 and $5 a gallon, respectively. Heating oil futures jumped as much as 3.4% on Monday as disruptions to shipments through the Strait of Hormuz compounded the impact of Russia’s July diesel export ban.
Crude prices have repeatedly swung on the prospects for escalation and detente in the conflict, which has at times largely blocked the strait through which about a fifth of the world’s oil flows. Futures are coming off the back of the biggest weekly gain since April after the resumption of hostilities.
The advance reflects a dramatic reversal in money managers’ positioning. Last week, renewed US strikes on Iran prompted hedge funds to add net-long ICE Brent positions at the fastest pace since 2016. With positioning having hovered near extreme bearish levels beforehand, the rally has been amplified by aggressive short covering and looks set to continue, analysts say.
“As prices test the $90 a barrel region in Brent crude oil, CTAs are becoming more likely to begin adding back length once again,” said Ryan McKay, a senior commodity strategist at TD Securities, referring to commodity trading advisors, or algorithmic traders.
The renewed attacks on tankers mean that the trade of shuttling oil out of Hormuz has come under pressure and shipping traffic through the waterway is at a near-standstill. Two vessels owned by a major Greek tanker company were struck in Hormuz overnight.
Escalating hostilities in the Middle East have raised concerns over a supply crunch. Excluding China, global stockpiles are at a record low, according to JPMorgan Chase & Co., leaving the world with “little room for error.”
There are supply issues beyond the Middle East, too. On Monday, oil loading at the Caspian Pipeline Consortium’s oil terminal on Russia’s Black Sea coast was suspended after drone attacks on the facilities. It follows a similar halt over the weekend.
Oil Prices
- WTI for August delivery edged up 0.9% to settle at $83.23 a barrel in New York.
- Brent for September settlement rose 1.3% to settle near $89.22 a barrel.
by Bloomberg | Alex Longley, Mia Gindis
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas