Oil: Strait risk and cautious positioning – ING

ING analysts Ewa Manthey and Warren Patterson point out that oil prices are being kept up by uncertainty surrounding the Strait of Hormuz, amid ongoing US-Iran talks. They observe that net long positions in NYMEX WTI and ICE Brent have decreased, even as US oil activity rebounds and US crude exports stay high. Gas prices in Henry Hub are also bolstered by warmer weather and increased LNG feedgas flows.

The Strait of Hormuz remains a source of concern, with talks between Iran and Oman possibly leading to a new shipping route, though a complete opening of the waterway may hinge on improvements in US-Iran negotiations. Last week, a more cautious approach was taken by speculators. Money managers reduced net long positions in NYMEX WTI by 7,257 lots, reaching 101,050 lots, while net longs in ICE Brent fell by 20,361 lots, settling at 164,722 lots, marking two weeks of declining positions.

US oil activity has been on the rise, with the oil rig count increasing to 454, the highest since May 2023. However, US crude exports continue to be robust as buyers look for alternative supply sources, although much of the recent uptick is driven by inventory reductions rather than strong production growth. Gas market prices have seen a second day of gains, supported by predictions of warmer weather, higher demand in the power sector, and increased LNG feedgas flows.

The reports of potential new processing capacity at the Corpus Christi LNG terminal could further boost demand for feedgas by approximately 0.8bcf/d.