Key facts
- Oil prices have fallen significantly, with Brent crude down 10% weekly, erasing gains from U.S.-Iran strikes.
- Middle East crude benchmarks Dubai and Murban have flipped into contango.
- Crude transits through the Strait of Hormuz have increased.
- Iran and the United States have agreed to halt recent hostilities.
- Middle East producers are loading oil and LNG, with a fourth VLCC seen at Saudi Arabia's Ras Tanura terminal.
- Analysts warn markets are too complacent about continued drawdown in global inventories.
Oil prices climbed early Monday, suggesting a market shift from complacency to concern over potential disruptions in the Strait of Hormuz. Despite a recent agreement between the U.S. and Iran to halt hostilities, analysts warn that markets may be too optimistic about the swift return of oil flows and too dismissive of multi-decade low global inventories.
Brent Crude prices were up 1.18% at $72.84 per barrel, and WTI Crude rose 1.73% to $70.43. This movement follows a weekend escalation involving attacks on commercial vessels and subsequent U.S. strikes on Iran. The Thursday attack on the container ship Ever Lovely caused some shipowners to pause operations pending safety assessments.
ING's commodities strategists, Warren Patterson and Ewa Manthey, noted that participants appear to be "shrugging off these developments, instead focusing on what a continued recovery in oil flows would mean for the global balance." They cautioned that this "complacency is odd and clearly leaves significant upside risk if the supply recovery proves slow – or if we see significant re-escalation."
Previously, oil prices had fallen significantly, with Brent crude down 10% weekly, erasing gains made since earlier U.S.-Iran strikes. Middle East crude benchmarks Dubai and Murban had flipped into contango, indicating a temporary oversupply. Crude transits through the Strait of Hormuz had increased, raising hopes for a gradual reopening, with multiple Very Large Crude Carriers (VLCCs) loading and transiting.