Brent eases as US-Iran diplomatic hopes grow

The front-month ICE Brent contract has declined by $3.68/bbl on the day, to trade at $85.53/bbl at 09.00 GMT.

IMAGE: Oil pumpjacks. Getty Images

Upward pressure:

Brent crude’s price has felt some upward pressure as security threats in the Red Sea continue to impact Middle East energy flows.

Yemen's Iran-aligned Houthi militant group said it will maintain its blockade and continue targeting Saudi Arabia-linked oil tankers attempting to transit the Bab al-Mandeb Strait.

“There are still concerns over vessel movements through the Bab el-Mandeb Strait, putting Saudi oil exports from the Red Sea at risk,” two analysts from ING Bank noted.

Riyadh is highly dependent on this alternative route, funnelling about 70% of its crude exports through the Red Sea port of Yanbu to circumvent the Strait of Hormuz.

“When it comes to the Houthis, the risk is not isolated to Saudi shipments, but also to Saudi oil infrastructure,” ING Bank’s analysts said.

Downward pressure:

Brent futures have sold off heavily as the US and Iran continue to refrain from launching further strikes against each other.  

US President Donald Trump said Washington and Tehran have resumed talks and that there is a "good chance" of reaching a deal.

“US President Donald Trump said that he decided to pause the strikes to give negotiations another chance,” ANZ Bank’s senior commodity strategist Daniel Hynes noted.

This sell-off was further exacerbated by reports that oil loadings have resumed at the Caspian Pipeline Consortium (CPC) terminal on Russia’s Black Sea coast.

Oil loadings have resumed at both the CPC terminal and the Sheskharis terminal in Russia, according to ING Bank’s analysts.

By Aparupa Mazumder

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