Oil Slips as Iran Diplomacy Picks Up

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

Oil dipped as traders weighed moves to de-escalate tensions in the Persian Gulf and awaited the outcome of consequential elections.

Oil dipped as traders weighed moves to de-escalate tensions in the Persian Gulf and awaited the outcome of consequential elections, including in Israel.

Brent fell nearly 2% to settle below $114 a barrel, while West Texas Intermediate settled just under $100. US-traded gasoline and diesel futures also posted declines on the day near 3%.

In the Israeli contest, Prime Minister Benjamin Netanyahu, who launched the war on Iran with US President Donald Trump in February, is pledging to topple Tehran’s regime. His challenger, opposition leader Gadi Eisenkot, says Iran’s nuclear program must be stopped but that regime change is “not an achievable goal.” Israeli polls close at 10 p.m. local time.

The results of the election will help dictate the course of the war on the Islamic Republic, one that has upended global energy flows, snarled shipping in the critical Strait of Hormuz and pulled in Yemen’s Houthi rebels, with attacks on key supplier Saudi Arabia.

“If Netanyahu loses, it makes it difficult for Trump to go it alone, assuming Eisenkot is not willing to jump in,” said Robert Yawger, director of the energy futures division at Mizuho Securities USA LLC. “To a certain degree, it would be a warm-up vote for the US midterms,” where voter concerns span disillusionment with the Iran war and soaring energy costs, he added.

The high-stakes election comes against a backdrop of renewed diplomacy in the Middle East. Senior officials from Saudi Arabia, Pakistan and Turkey traveled to Tehran for discussions with the Iranian government on Monday. Iran said it is flexible on a proposal to reopen Hormuz in exchange for the lifting of a US blockade in seven days. 

Russian President Vladimir Putin and his Iranian counterpart, Masoud Pezeshkian, also met Tuesday, the semi-official Tasnim news agency reported. US actions necessitate expanding “cooperation among sanctioned nations,” the report said.

Elsewhere, Iranian Supreme Leader Mojtaba Khamenei reiterated Iran’s conditions for ending the war with the US, during a meeting with his security chief, according to a Telegram statement from his office.

Supply risks remain even as crude flows have recovered to around prewar levels, while shipping costs are elevated. Saudi Arabia contained a fire near its biggest export terminal at Ras Tanura on the Persian Gulf following an attack on the region, a person with knowledge of the matter said.

“For prices to revert lower, traders need solid statements from all sides that the situation is cooling and that free movements can be established,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S.

Global benchmark Brent has surged about 90% this year. Investors are bracing for a packed stretch of potential market catalysts, including a Federal Reserve decision later this week as well as the US midterms on Nov. 3.

That election will offer another potential inflection point, as Trump has suggested that strikes against Iran could resume following the vote. At the weekend, the president told Fox News it was “getting to be decision time” on Iran.

For now, Washington’s forces are continuing to block Iran’s ports to choke off its crude shipments, while assisting flows through Hormuz from other Persian Gulf producers. 

Brent’s prompt spread — the difference between its two closest contracts — remains in steep backwardation, a bullish pattern. The gap is near $5 a barrel, up from $3.69 a week ago.

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