Brent Oil: Supply risks offset by strong flows – Danske Bank

Danske Research Team notes that Brent Oil initially spiked after reports of an Iranian attack on a cargo ship near Oman and a pause in U.N. escort operations in the Strait of Hormuz. However, crude flows through Hormuz have risen to their highest level since the war began, and Brent has slipped below USD74/bbl, with markets focusing more on broader supply dynamics than on renewed geopolitical tensions.

Geopolitics versus supply outlook

"US-Iran agreement, a cargo ship was reportedly attacked near Oman by Iran, prompting the U.N. maritime efforts to pause its Strait of Hormuz (SoH) escort operation and raising doubts over a preliminary deal to end the US-Iran war."

"Iran's Persian Gulf Strait Authority warned that ships outside its designated routes travel at their own risk, while shipping data showed crude flows through Hormuz have risen to their highest level since the war began."

"Despite an initial spike, Brent has slipped to below USD74/bbl and remains on track for steep weekly losses, as markets look past renewed Strait of Hormuz tensions and focus on the broader supply outlook."

"In commodities, according to Reuters, Iraq is considering leaving OPEC if it does not secure a higher quota, following the UAE's exit on 1 May, which has strengthened Iraq's bargaining position."

"If traffic through the SoH normalises, increased output from the UAE and possibly Iraq could trigger a positive oil supply shock and even a price war that would effectively end OPEC, although Bloomberg tracking shows Hormuz traffic remains well below pre-war levels despite a recent pickup."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)