Deutsche Bank strategists emphasize the high volatility in the Brent crude oil market due to the re-emergence of doubts regarding the ceasefire in the Middle East. Brent initially fell more than 13% to a four-week low near $95 before rebounding above $96 on lingering concerns about Hormuz supplies and the durability of the ceasefire. They see more modest declines further down the curve and easing fears of stagflation.

Uncertainty about the ceasefire is causing rapid changes

“So overall, even with question marks around a ceasefire, the fact that one had been reached created a huge wave of optimism and investors had a much clearer sense of the path towards de-escalation. Most immediately, the prospect of reopening the Strait of Hormuz led to a big drop in oil prices, with Brent crude (-13.29%) falling to a four-week low of $94.75/bbl, while WTI (-16.41%) fell to $94.41 per barrel.”

“However, with Hormuz shipping restrictions continuing, declines were more moderate further down the oil curve, with 6-month Brent futures (-2.33%) closing at $81.19/bbl, still above the level at the end of last week.”

“As we go to press this morning, oil prices are rising again as several questions remain regarding the ceasefire announced on Tuesday evening. This was a combination of several factors, but it resulted in Brent crude oil (+2.34%) returning to USD 96.97/bbl and also decelerating the market’s growth momentum overnight.”

“So, even with all the volatility in recent weeks, it was another day of historic moves, and the overnight move in Brent prices this morning (+2.34%) still leaves us well below the pre-ceasefire crude price of around $110 a barrel.”

(This article was created with the support of an artificial intelligence tool and has been reviewed by an editor.)