ING analysts Warren Patterson and Ewa Manthey note that crude oil has surged as US-Iran peace talks remain stalled and energy flows through the Strait of Hormuz remain restricted. They highlight tightening market fundamentals, a shortage of about 13 million barrels per day and the need for higher prices to cause demand destruction, and point to fresh U.S. sanctions on Iranian crude oil and related transportation.
Tightening the balance raises oil levels
“Oil prices are gaining in value this morning after attempts to get US-Iran peace talks on track failed, dashing hopes that energy flows through the Strait of Hormuz will resume any time soon. This morning’s ICE Brent trade is up about 2%, after rising almost 17% over the past week.”
“The lack of progress means the market is shrinking every day, requiring oil to be re-priced at higher levels. There is no alternative to plug the shortfall of around 13 million barrels per day.”
“Of course, the longer this goes on, the greater the collapse in demand we will have to see. For further demand collapse to occur, prices will have to rise.”
“U.S. efforts to cut off Iranian oil would have additional benefits. Last week, the United States seized a sanctioned tanker carrying Iranian oil in the Indian Ocean.”
“The U.S. blockade appears intended to force a resolution and increase pressure on Iran to return to negotiations. The latest positioning data does not fully reflect the movement seen in the market over the past week.”
(This article was created with the aid of an artificial intelligence tool and has been reviewed by an editor.)
