Brent loses momentum amid hopes of a ceasefire

The front-month ICE Brent contract has declined by $4.55/bbl on the day, to trade at $98.21/bbl at 09.00 GMT.

IMAGE: Oil pumpjacks. Getty Images

Upward pressure:

Brent’s price has remained well supported by supply disruption concerns in the Middle East after the US military announced enforcing a blockade in the Strait of Hormuz.

US President Donald Trump said that Washington will block every vessel coming in and out of Iranian ports – multiplying concerns about crude oil flows through the region.  

A US blockade, which came into force yesterday, can curtail about 3 to 4 million b/d of regional crude oil supply, according to ANZ Bank’s senior commodity strategist Daniel Hynes.

Iran has already issued fresh threats to target vessels and ports in response to the US blockade, Al Jazeera reported.

“The US naval action could test the fragile ceasefire and raise the prospect of a re-escalation of the Middle East conflict,” Hynes said.

Downward pressure:

Brent’s price rally lost steam after Trump said Iran “wants to make a deal.” The comments came during a last-minute press conference at the White House yesterday, The Guardian reported.

“This suggests financial markets continue to look through the conflict to possible barrels being back on the market,” Hynes said.

However, Trump said during the press brief that Washington will not agree to a peace deal unless Tehran gives up its nuclear ambitions completely.

Diplomatic efforts to restart a dialogue between the US and Iran are continuing, with Pakistan reportedly offering to host the next round of talks in Islamabad, Al Jazeera reported.

“Oil is trading on the likelihood of de-escalation rather than outright supply disruption,” SPI Asset Management managing partner Stephen Innes said.

By Aparupa Mazumder

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