Oil: Geopolitical risk lifts prices – ING

ING analysts Warren Patterson and Ewa Manthey note that Brent has jumped above $76/bbl as renewed tensions in the Persian Gulf and US strikes on Iran revive supply concerns. The United States (US) has revoked a temporary licence for Iranian oil sales, while tight US inventories and damage to Russian refineries are supporting product cracks and middle‑distillate markets.

Brent rallies on renewed Gulf tensions

"Oil prices spiked following Iranian attacks on three ships in the Strait of Hormuz, including an LNG carrier and an oil tanker. ICE Brent settled a little more than 3% higher yesterday, and in early trading this morning it's up another 2.8%, leaving it trading above $76/bbl. The curve structure also strengthened, with the front end returning to backwardation after recently flipping into contango amid the ramp-up of Persian Gulf supply."

"In addition to military strikes, the US revoked a temporary licence that it had previously issued to allow for the sale of Iranian oil. While the revocation doesn’t fundamentally change oil market dynamics, it’s important from a sentiment perspective. It heightens the risk of a breakdown in the temporary deal between the US and Iran."

"The API reported overnight that US crude oil inventories fell by 400k barrels over the last week. Stocks at the WTI delivery hub, Cushing, fell by just 100k barrels. Inventory draws on the refined product side were more significant, with gasoline and distillate stocks falling by 2.9m barrels and 1.8m barrels, respectively."

"Ukrainian drone strikes on Russian refineries have intensified, adding fresh support to middle‑distillate markets. The sustained damage is now dragging down diesel exports, further tightening the refined-product balance. This comes at a time when the market is still awaiting a normalisation in refined product flows from the Middle East."

"As a result, the ICE gasoil crack has strengthened, trading back above US$50/bbl. The latest re-escalation in the Middle East will only provide further support."

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