Despite the recent decline in crude oil prices due to lower-than-feared disruption of Saudi exports, supply-side risks remain elevated, and not only in the Middle East, analysts at ING Bank also said on Tuesday.
Oil prices dropped on Friday and Monday, with Brent Crude falling to $100 per barrel from $108 a barrel hit early last week after Saudi Arabia shut down its key pipeline that bypasses the Strait of Hormuz.
Higher-than-expected Saudi shipments through Hormuz, however, have eased concerns about supply, while the never-ending hope of a diplomatic breakthrough also weighed on prices at the end of last week and early this week.
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On Tuesday morning, however, oil prices reversed course and made gains ahead of a UN General Assembly session that many hope will yield some progress on peace talks between the U.S. and Iran.
U.S. Treasury Secretary Scott Bessent threatened Iranian airlines with a “shut-down” from Wednesday, by means of airports refusing to refuel them and sell tickets, in the latest verbal escalation in the U.S.-Iran war.
“How do we do that? That if they land, you cannot provide them with fuel. You cannot provide them with landing services, you cannot sell them tickets, or you will be knocked out of the dollar system,” Bessent told CNBC in the latest U.S. flex against Iran.
The market clearly continues to weigh hopes of peace talks against ongoing disruptions to supply, ING’s commodities strategists Warren Patterson and Ewa Manthey said in a note early on Tuesday.
“Supply-side risks remain elevated,” the strategists said, noting the fresh supply concern coming from Libya, where an armed group on Monday shut down a valve at the pipeline linking the biggest oilfield, Sharara, with the Zawiya export terminal. As a result, the output at the field was slashed to around 127,000 barrels per day (bpd), from roughly 340,000 bpd prior to the incident.
By Tsvetana Paraskova for Oilprice.com
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