Brent gains as Iran conducts drills in Hormuz Strait

The front-month ICE Brent contract has gained by $0.52/bbl on the day, to trade at $67.94/bbl at 09.00 GMT.

IMAGE: Oil storage tanks. Getty Images

Upward pressure:

Brent crude’s price has felt upward pressure as tensions continue to build around Iran-US talks.

Iran’s military forces have held drills in the Strait of Hormuz, ahead of the highly anticipated nuclear talks later today, Reuters reported, citing Iran’s semi-official news agency Tasnim.

Market analysts view the move as a sign of Tehran’s willingness to safeguard the vital shipping corridor widely used by global maritime operators, should the negotiations fail to produce a breakthrough.

Oil risk premium continues to build “following Iranian naval drills carried out just ahead of US nuclear talks,” two analysts from ING Bank noted.

Downward pressure:

Representatives from Washington and Tehran will hold a second round of indirect talks in Geneva later today.

If the talks yield a positive outcome, they could ultimately help alleviate supply concerns stemming from the Middle East. Notably, Iran is the fourth-largest OPEC member, producing around 3.2 million b/d of crude oil.

The talks primarily aim to discuss Iran’s nuclear enrichment programme – something Washington has consistently opposed.

Separately, market analysts are eyeing discussions between Russia and Ukraine, that are supposed to resume today.

“The market remains unsettled amid ongoing geopolitical uncertainties, with investors staying cautious due to the pending US-Iran and Ukraine negotiations this week,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

By Aparupa Mazumder

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