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 analysts Warren Patterson and Ewa Manthey have pointed to a resurgence in oil prices, with ICE Brent climbing back above $82 a barrel, despite ongoing obstacles to a US-Iran agreement. The duo notes that Iranian demands regarding the Strait of Hormuz and scant indications of compromise persist. ING anticipates Brent to average $80 a barrel in the third quarter, yet cautions that significant risks and uncertainty remain.
Patterson and Manthey emphasize that the recent developments indicate that negotiations between the US and Iran are unlikely to be smooth sailing. The analysts highlight Iran's potential intention to prohibit US and Israeli vessels from the Strait of Hormuz, coupled with a demand for compensation from hostile nations before resuming usage.
Moreover, Iran is continuing to propose charging fees for ships passing through the Strait of Hormuz, rather than imposing a toll. The lack of apparent compromise from Iran complicates the prospect of a sustainable deal. Despite some progress seen in recent days, the mounting tensions and deteriorating trust between the US and Iran could lead to a further deterioration of the situation.
The analysts maintain their expectation of normalised flows towards the end of the third quarter, leading to an average Brent price of $80 a barrel for the quarter. However, they caution that there is considerable risk and uncertainty surrounding this outlook. Saudi Arabia has decreased its official selling prices for various crude grades to all destinations for September deliveries.
Arab Light to Asia faced a reduction by S$0.50 a barrel, marking a $2 a barrel discount to the benchmark. This move has prompted Asian buyers to push for further cuts in Saudi Arabia's official selling prices amid the escalating tensions in the Red Sea. Consequently, some tankers are opting to traverse the longer and more costly route around Africa.
The Middle East uncertainty is once again playing a role, bolstering the demand for the US dollar as a safe haven asset ahead of the crucial US Nonfarm Payrolls (NFP) data release.
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