The Brent crude oil price decreased on Friday and jumped up on Monday, Skandinaviska Enskilda Banken AB (SEB) Chief Commodities Analyst Bjarne Schieldrop highlighted in a report sent to Rigzone today.
“The Brent June crude oil contract traded down 5.1 percent last week to a close of $90.38 per barrel,” Schieldrop pointed out in the report, adding that it reached “a high of $103.87 per barrel last Monday and a low of $86.09 per barrel on Friday as Iran announced that the Strait of Hormuz was fully open for transit”.
Schieldrop noted, however, that this “quickly changed over the weekend as the U.S. upheld its blockade of Iranian oil exports while Iran naturally responded by closing the SoH again”.
In the report, Schieldrop warned that the U.S.-Iran ceasefire is expiring on Tuesday. He pointed out that the U.S. has said it will send a delegation for a second round of negotiations in Islamabad in Pakistan but warned that Iran “has for now rejected a second round of talks as it views U.S. demands as unrealistic and excessive while the U.S. is also blocking the Strait of Hormuz”.
Schieldrop went on to state in the report that, “while Brent is up five percent” on Monday morning, “the financial market is still very optimistic that progress will be made; that talks will continue and that the SoH will fully open by the start of May”, which Schieldrop said is consistent with a rest of year average Brent crude oil price of around $90 per barrel.
The SEB analyst also flagged “financial optimism vs. physical deterioration” in the report.
“We have a divergence where the financial market is trading negotiations, improvements and resolution while at the same time the physical market is deteriorating day by day,” he said.
“Physical oil flows remain constrained by disrupted flows, longer voyage times and elevated freight and insurance costs,” he added.
“Financial markets are betting that a U.S./Iranian resolution will save us in time from violent shortages down the road. But every day that the SoH remains closed is bringing us closer to a potentially very painful point of shortages and much higher prices,” Schieldrop warned.
In a market comment sent to Rigzone on Monday, Naeem Aslam, CIO at Zaye Capital Markets, said crude oil “remains highly volatile”, pointing out the commodity’s “sharp rebound” today, which he outlined “underscore[es]… how quickly sentiment is shifting between relief and renewed fear”.
“Prices initially collapsed as confirmation of the Strait of Hormuz reopening eased immediate supply concerns across a route that handles roughly a fifth of global oil flows, but that weakness was rapidly reversed,” Aslam said in the comment.
“The broader backdrop still favors a firm risk premium: OPEC is flagging tighter balances from reduced output and disruptions, while the IEA continues to warn that instability in key transit routes is constraining global crude flows,” he added.
“On the macro side, demand signals remain stable rather than strong, leaving oil sensitive to central bank messaging, with any hawkish tone likely to strengthen the dollar and cap upside, while a softer policy stance could support liquidity and consumption expectations,” he continued.
“For now, the market remains trapped between de-escalation hopes and structural supply stress, keeping downside open toward $80-85 if tensions ease sustainably, but leaving the door wide open for a push back above $100 if disruptions intensify,” Aslam went on to state.
Rigzone has contacted the White House and the Iranian Foreign Ministry for comment on the SEB report and Aslam’s statement. At the time of writing, neither have responded to Rigzone.
In an oil market update sent to Rigzone early Saturday, Rystad Energy highlighted that Iran’s Foreign Minister, Seyed Abbas Araghchi, declared free passage through the Strait of Hormuz on Thursday, “sending front-month Brent futures down nearly $10 per barrel”.
“Markets are pricing in a growing likelihood of a permanent deal and faster de-escalation,” Rystad added in that report.
Artem Abramov, Deputy Head of Analysis, noted in this Rystad update that Araghchi’s statement represented “a significant and unexpected diplomatic opening”.
“The Strait of Hormuz has been the single most consequential variable in global oil markets since the conflict escalated, and any credible signal that the chokepoint may reopen, even temporarily, is a market-moving development of the first order,” he added.
“Rystad Energy is still tracking approximately 12.4 million barrels per day (bpd) of curtailed oil production across Saudi Arabia, Iraq, Iran, the UAE, Kuwait, Qatar, and Bahrain. Even so, today’s announcement has materially shifted the probability distribution of outcomes,” he continued.
“The market is not waiting for a formal deal – it is pricing in the possibility of one,” he went on to state in that update.
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