Brent: US-Iran tensions support prices – ING

ING analysts Warren Patterson and Ewa Manthey note renewed strength in Oil, with ICE Brent rallying back above $82/bbl as obstacles to a US-Iran deal persist. They highlight Iranian demands around the Strait of Hormuz and limited signs of compromise. ING still expects Brent to average $80/bbl in the third quarter, while stressing significant risks and uncertainty.

Brent supported by deal obstacles

"Oil prices rallied yesterday, with ICE Brent settling 3.8% higher on the day, taking it back above $82/bbl. This strength continued in early morning trading today. Developments over the last 24 hours or so demonstrate once again that negotiations between the US and Iran are unlikely to proceed smoothly."

"There are suggestions that Iran wants to ban US and Israeli ships from the Strait of Hormuz, while also seeking compensation from hostile countries before they can use the strait again. In addition, Iran still wants to charge fees for ships transiting the Strait of Hormuz, in the form of service fees rather than a toll. There doesn’t seem to be much of a compromise, which ultimately makes it more difficult to reach a sustainable deal."

"Despite clear signs of progress in recent days, the tenor of the rhetoric and growing distrust between the US and Iran mean things could go from bad to worse once again. For now, we hold onto our view that flows will start to normalise through the third quarter, which leaves us expecting Brent to average $80/bbl this quarter. However, there's plenty of risk and uncertainty to this view."

"Saudi Arabia cut its official selling prices for almost all crude grades and to all destinations for September loadings. Arab Light into Asia was cut by S$0.50/bbl to a $2/bbl discount to the benchmark. There has been a push by Asian buyers for the Saudis to cut their official selling prices (OSPs) amid the escalation in the Red Sea."

"It means that some tankers are taking the longer and more expensive shipping route around Africa."

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