Crude oil prices were little changed this morning following a volatile session on Monday. Yesterday, prices spiked higher after the weekend on fears that President Trump was about to break the ceasefire with Iran.
He threatened to unleash an attack designed to bring leaders in Tehran back to the negotiating table for the first time since early April, when the ceasefire was agreed. But prices pulled back after Saudi Arabia, Qatar and the United Arab Emirates persuaded the Trump administration that Iran was negotiating quietly, and in good faith.
Despite this, the standoff continues, and the oil price has crept up. The Strait of Hormuz remains effectively shut and controlled by Iran, and this is starting to have serious implications for the 20% of global crude oil supply that used to pass through this chokehold, along with liquefied natural gas, fertilisers, helium and other vital chemicals. Meanwhile, the US continues to blockade Iranian ports in the region.
The bottom line is that there are a few indications that anything is going to improve in the near-term. Yet that is not the view of oil traders. Brent forward contracts continue to trade with a steep backwardation. This implies that any near-term supply shortages will disappear over the next few months, with the price of Brent forecast to be around $30 per barrel cheaper by year-end than the current spot rate.
Source: TN Trader
