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Oil: Market focuses on Persian Gulf risks – ING

ING strategists Warren Patterson and Ewa Manthey note that Oil prices remain supported as traders focus on Middle East and Persian Gulf supply risks rather than the Russia-Ukraine energy ceasefire. Brent has pushed back toward $107/bbl, while hurricane-related disruptions in the Gulf of Mexico and Saudi plans to expand pipeline capacity add further supply-side complexity for the market.

Brent supported by supply concerns

"The weakness in the oil market following President Trump’s announcement of an energy ceasefire between Russia and Ukraine was short-lived. That goes, too, for the US-Russia diesel export deal. ICE Brent settled 1.8% higher, just shy of $107/bbl yesterday — the highest close since mid-September."

"Clearly, the market is more concerned over recent developments in the Middle East, with Houthi attacks on Saudi Arabia and the lingering risks to oil flows from the Persian Gulf."

"While diesel initially saw some weakness following the US-Russia deal, strength has returned. The volumes suggested are doing little to offset the tightness in the global middle distillate market."

"The Persian Gulf could see further bypass volumes in a relatively short time period. The Saudi Energy Minister said that the country is looking to expand its pipeline export capacity to 10m b/d, up from a current 7m b/d."

"Meanwhile, hurricane activity in the Gulf of Mexico continues to disrupt offshore operations for US producers; they’ve shut in almost 605k b/d of oil production, which is equivalent to nearly 30% of total US production in the Gulf of Mexico, according to the Marine Minerals Administration."

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

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The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

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