Oil: Deal optimism drives sharp selloff – ING

ING strategists Warren Patterson and Ewa Manthey note that Oil prices, including ICE Brent, fell sharply on optimism over a potential US–Iran Middle East deal. They highlight that markets may be overreacting given ongoing uncertainty, Iranian denials of talks, and renewed security risks in the Strait of Hormuz and Black Sea. European gas also weakened, but storage and demand dynamics look more comfortable than in 2021.

Middle East deal hopes hit Brent

"Oil prices dropped sharply yesterday on rising optimism that the US and Iran may be moving closer to reviving a Middle East deal."

"ICE Brent settled more than 7% lower on the day, after President Trump called off strikes against Iran, aiming to get a deal across the line."

"He also suggested that talks between the US and Iran have already resumed. Iranian officials continue to deny that any negotiations are under way, insisting that current discussions with Oman are limited to shipping routes through the Strait of Hormuz."

"The scale of the sell-off seems fairly overdone, given that there’s still considerable uncertainty."

"And with Iran denying that any talks are underway and Trump issuing warnings if no deal materialises, the backdrop clearly leaves ample room for a renewed escalation."

"In the Black Sea, recent days have seen more loading activity at the CPC terminal, which ships Kazakh oil from Russia’s coast. Loadings had been disrupted in recent weeks amid ongoing Ukrainian attacks on Russian energy infrastructure."

"There have also been risks for oil tankers operating in and around the terminal, leaving shipowners hesitant to load. For now, flows into the terminal still appear to be running below normal levels."

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