Crude Closes Down for Third Day
by Bloomberg | M. Gindis, A. Longley
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas
Crude settled lower amid hopes for a Strait of Hormuz reopening.
Image by traviswolfe via iStock
Oil extended declines for a third day as investors speculated on whether the US and Iran are closing in on a peace deal that could lead to a resumption of flows through the vital Strait of Hormuz.
West Texas Intermediate slipped 1.9% to settle around $96 a barrel, the lowest in almost two weeks, as both sides on Thursday signaled progress toward a permanent ceasefire and potential reopening of the waterway. US President Donald Trump has repeatedly said an agreement was close since a truce began in early April, though no breakthrough has yet materialized.
The commodity reversed some losses in post-settlement trading after Iranian President Masoud Pezeshkian said the country “won’t back down” in talks.
Futures have been highly sensitive to headlines around the status of peace talks in recent days, with traders wary of being caught wrong-footed by a sudden resolution. Earlier in the session, prices were jostled over whether a directive had been issued on Iran’s intention to keep its weapons grade uranium inside the country.
“The longer the ceasefire holds without escalation, the more the market leans toward a diplomatic outcome, even as timelines extend and inventories tighten,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Group.
Despite today’s bearish tone, oil prices remain nearly 40% higher than before the war began. The virtual closure of the critical global energy shipping route has driven energy prices sharply higher and triggered a global selloff in government bonds as inflationary pressures intensify.
A majority of market participants expect futures to carry a lasting risk premium for years to come because of structural shifts triggered by the war, according to a survey by Bloomberg Intelligence. One such potential shift: Iran is discussing a permanent toll framework with Oman that would formalize greater control over maritime traffic through the strait.
Still, traders have consistently priced in the possibility of an abrupt deescalation, including a deal under which Iran reopens the key shipping lane and unlocks millions of barrels stuck in the Persian Gulf.
The strait needs to reopen by the end of June to prevent a significant increase in oil prices, Sen added. Already, global stockpiles of crude oil and products are being drawn down at a record pace this month as the war drags on, curtailing supplies, according to Goldman Sachs Group Inc.
On Wednesday, US crude inventories including strategic reserves posted the biggest decline on record, as record American exports help keep markets supplied overseas.
Even if the Iran conflict ended immediately, Middle East oil flows would not fully recover until well into 2027, Abu Dhabi National Oil Co. Chief Executive Officer Sultan Al Jaber said Wednesday. The Strait of Hormuz closure was the market’s most severe supply disruption on record, he said.
There are signs that some of the market’s worst fears around supply are being averted for now. Low-cost European airline EasyJet Plc said on Thursday that it has seen no issues with jet fuel supply and has no concerns about its ability to fly its planned schedule over the summer.
“The supply chain going out 4-6 weeks looks absolutely fine,” Chief Executive Officer Kenton Jarvis said in a Bloomberg TV interview. “What we’re also hearing is that the increase in production in many countries means that the diversification of fuel away from the Gulf region is being successful.”
Oil Prices
- WTI for July slipped 1.9% to settle at $96.35 a barrel in New York.
- Brent for July settlement fell 2.3% to settle at $102.58 a barrel.
by Bloomberg | M. Gindis, A. Longley
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas