Brent retracts as Middle Eastern tension eases over the weekend
The front-month ICE Brent contract lost $1.00/bbl on the day from Friday, to trade at $86.37/bbl at 09.00 GMT.
PHOTO: Oil pumpjacks. Getty Images
Upward pressure:
Despite Brent’s latest price drop, the benchmark has remained supported due to geopolitical tensions between Israel and Iran that have kept the oil market on its edge with supply concerns.
“[Oil] investors should pay close attention to oil prices as the war continues to evolve,” J. P. Morgan’s global market strategist Jack Manley said.
Oil market analysts continue to price in the chances of an Israeli airstrike in the future that could disrupt Iranian oil facilities. “Any further escalation would only bring the oil market closer to actual supply losses,” ING Bank’s head of commodities strategy Warren Patterson said.
The oil market has been beset with further supply-side risks. The US government reimposed oil sanctions on Venezuela after the country’s President Nicolás Maduro failed to fully meet the commitments made regarding holding fair presidential elections in the second half of this year.
This could potentially disrupt about 600,000 b/d of crude exports from Venezuela, ANZ Bank’s senior commodity strategist Daniel Hynes said.
Downward pressure:
Brent futures decline today can be attributed to the de-escalation of conflict between Israel and Iran.
“Crude futures were on a slippery slope… as relative calm on the Israel-Iran front over the weekend started to chip away at the Mideast geopolitical risk premium in prices,” VANDA Insight’s founder and market analyst Vandana Hari said.
It seems that currently both Iran and Israel are downplaying the implications of the latest events, market analysts added.
“Iran downplaying Israel’s attacks and showing no urgency to retaliate,” has put a downward pressure on Brent’s price, Saxo Bank’s head of FX strategy Charu Chanana said in a note.
By Aparupa Mazumder
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