Oil Extends Losses on Hormuz Talks
by Bloomberg | M. Gindis, G. Levin, C. Gorrivan
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas
Oil fell for a third day as optimism over a potential Strait of Hormuz shipping agreement outweighed ongoing geopolitical risks.
Oil fell for a third straight session on signs that the US and Iran are nearing a deal to reopen the Strait of Hormuz and restore millions of barrels of daily shipments disrupted by months of war.
West Texas Intermediate edged 0.7% lower to close near $75 a barrel, the lowest in almost a month. Iran said it reached an agreement with Oman on a proposed route for shipping through the waterway and hasn’t yet reached a decision on second-stage talks with the US. President Donald Trump said late Tuesday that a deal on Hormuz was imminent. Futures have been highly sensitive to headlines around progress toward a deal.
Still, uncertainties remain. Traders were reluctant to fully unwind long positions, wary of being caught wrong-footed by a sudden escalation. Trump has repeatedly claimed diplomatic breakthroughs that never materialized. Iranian state TV earlier played down the outcome of the Iran-Oman discussions, saying an agreement wouldn’t necessarily lead to an immediate opening of the strait.
“Traders are reading the tea leaves in search of direction, and with price action increasingly reflecting expectations of progress, I expect crude to remain highly sensitive to every headline until we get more clarity over the next few days,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Group.
Oil had been falling this week on hopes the US and Iran might find a compromise that would free up Persian Gulf cargoes that accounted for about a fifth of global supplies before the war.
Technical factors also amplified oil’s selloff. Trend-following commodity trading advisers slashed long positions to sit at 18% long in Brent, compared with 73% at the start of the week, according to data from Kpler’s Bridgeton Research Group. The robot traders are known for their tendency to exacerbate price swings.
Just ahead of Wednesday’s settlement in New York, the Houthi militant group said it targeted a Saudi oil tanker in the Gulf of Aden. The commodity had briefly surged earlier after a Houthi spokesperson said the group would escalate attacks on Saudi vessels in the northern Red Sea. Exports from the waterway have become a vital lifeline for Saudi Arabia.
Eyes on the deal
Prices dipped earlier after Axios reported that the US, Iran and Oman were preparing to announce a 60-day accord on shipping via Hormuz.
“The deal to open the Strait of Hormuz just got closer to reality,” said Robert Yawger, director of the energy futures division at Mizuho Securities USA LLC. He added that key questions remain, including whether Iran’s hard-line Islamic Revolutionary Guard Corps backs the agreement.
Even if a short-term deal to normalize commercial shipping is reached, it might still fail to end the war or resolve Trump’s concerns about the Islamic Republic’s nuclear program.
“As long as Iran controls inbound traffic or remains hostile to two-way, US-backed Omani flows, we are likely already seeing the max potential flow in the five million barrels a day range,” said Ryan McKay, senior commodity strategist at TD Securities.
In the US, oil inventory data published Wednesday by the Energy Information Administration showed crude inventories rose by 2.5 million barrels last week, while stockpiles of refined products posted deep declines. The offsetting inventory shifts had little net impact on prices, with traders instead focused on developments in the Middle East.
“Strong imports combined with an ongoing slower pace of exports to yield a modest build to crude inventories, also aided by a tick lower in refining activity,” said Matt Smith, Americas lead oil analyst at market intelligence firm Kpler.
Oil Prices
- WTI for September delivery closed at $75.22 a barrel in New York
- Brent for October delivery settled at $79.45 a barrel
by Bloomberg | M. Gindis, G. Levin, C. Gorrivan
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas