Oil Dips from 6 Month High as Officials Meet in Tehran

by Bloomberg | Mia Gindis, Paul Burkhardt
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas

Oil retreated from a six-month high as senior officials from several countries flew to Tehran.

Oil retreated from a six-month high as senior officials from several countries flew to Tehran in a bid to revive talks aimed at preventing a broader escalation in the Middle East.

Brent futures settled near $116 a barrel on Monday. Officials from Saudi Arabia, Pakistan and Turkey agreed to continue security talks with Iranian leaders, the semi-official IRIB news agency reported. 

Iranian President Masoud Pezeshkian said his country is ready to back “any understanding” that leads to regional unity and reiterated the Islamic Republic isn’t seeking nuclear weapons, according to another state-run media outlet. 

“The market is probably looking at that as a positive sign that maybe there is a dialogue occurring,” Francisco Blanch, head of global commodities and derivatives research at Bank of America, said in a Bloomberg TV interview. “It’s a very uncertain moment, but for oil if Iran goes back to attacking infrastructure in the region we think $120 a barrel is probably on the cards on average for the next few months.” 

Technical factors also contributed to Monday’s retreat. The global benchmark’s 14-day Relative Strength Index — a measure of the pace and intensity of price movements — topped 74 to push into overbought territory on Friday, above the level of 70 that generally signals prices due for a pullback.

Several bullish developments limited the slide. The Saudi coalition said it destroyed three drones in Riyadh. Hezbollah is preparing for a new regional war after receiving funds from Iran, according to a Reuters report that cited Lebanese security personnel. That followed weekend clashes between Yemen-based Iranian-backed Houthis based and Saudi forces, ratcheting up risks to energy flows. 

The rebel group claimed to have targeted energy sites, while the Saudi-led coalition said on Saturday that it intercepted missiles targeting several areas, including the western port of Yanbu. 

Brent has surged more than 80% this year as the war in the Middle East disrupted flows. Investors also are watching Israeli elections on Tuesday and the US midterms next week. 

The White House has pulled virtually every lever within reach to lower energy costs ahead of the Nov. 3 vote, with gasoline prices now above the average during the Biden administration. 

In recent days, Washington ordered a wider evacuation of diplomatic personnel from across the Middle East, while Trump has hinted US forces could resume strikes after the election. Over the weekend, he told Fox News that it’s “getting to be decision time” on whether to strike a deal with Iran or “finish it off.”

At present, crude shipments from the Middle East are estimated to have recovered to near pre-war levels, including through the Strait of Hormuz, despite Iranian attacks on vessels. The narrow waterway links the Persian Gulf to global markets and has been at the center of the conflict.

More than 1.5 billion barrels of crude have passed through Hormuz with American assistance “since summer,” according to US Central Command. American forces have imposed a full blockade of Iranian ports while assisting passage by other Persian Gulf producers’ vessels.

“The market is pricing in some risk of escalation after the US midterm elections, when Washington may feel less constrained by the immediate political cost of higher oil prices,” said Jorge Leon, head of geopolitical analysis at Rystad Energy AS. “That risk could keep prices elevated even if flows improve.”

by Bloomberg | Mia Gindis, Paul Burkhardt
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas