Oil: Market looks through Hormuz risks – MUFG
Michael Wan at MUFG notes Brent has dropped below US$80 as hopes rise for a deal to reopen the Strait of Hormuz.
Oil prices have dipped below $80 per barrel as optimism builds for a potential deal to restore the Strait of Hormuz. The decline appears to outpace concerns over supply disruptions, driven by strong economic fundamentals. Chinese oil imports have decreased significantly, while alternative routes such as coal-to-chemicals and electric vehicles are gaining traction, reducing the world's reliance on oil.
China's progress in adopting coal-to-chemicals technology and electrification has contributed to market resilience. Iran has reportedly considered allowing European nations to clear mines from Hormuz, enhancing the prospects for a resolution. However, despite these developments, the market remains vigilant about the possibility of a "Super El-Nino" weather event later this year, which could threaten oil supplies once again.
In the forex realm, GBP/USD edged closer to 1.3550 in European trading hours, holding steady after inflation data matched forecasts. EUR/USD continued its upward trajectory, nearing 1.1600, as traders await guidance from the European Central Bank and the Federal Reserve. Meanwhile, gold prices rebounded slightly above $4,350, supported by cautious market sentiment amidst mixed economic signals.
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