Brent drops nearly $10/bbl on front-month change

The front-month ICE Brent July contract traded at $111.78/bbl at 09.00 GMT today, which was $9.14/bbl lower than the now-expired June contract traded at a day earlier.

IMAGE: Oil pumpjack. Getty Images

Upward pressure:

Oil market participants continue to remain concerned that the ongoing closure of the Strait of Hormuz will extend production cuts by Persian Gulf producers.

Yesterday, Iran’s new Supreme Leader Mojtaba Khamenei vowed not to give up the country’s nuclear assets and missile technologies, according to media reports. The news has put some upward pressure on Brent’s price today.

“He [Khamenei] also signalled that Iran will keep control of the Strait of Hormuz,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

Despite today’s decline in price, Brent crude is poised to close the week above $110/bbl mark, as analysts see no immediate ceasefire deal on the table.

“There are concerns that the US is preparing for renewed hostilities,” Hynes said.

Downward pressure:

The front-month ICE Brent contract has changed from June to July, which goes a long way to explain the past day's drop in price.

While the June contract was trading around $120/bbl yesterday, the July contract is near $111/bbl, accounting for much of the roughly $9/bbl decline seen in the previous session.

Dated Brent, the benchmark for the spot physical market eased below $123/bbl, while front-month futures fell to $111/bbl ahead of the expiry of the June contract, according to Hynes.

“The gap between the paper and physical markets is narrowing as tightness begins to materialise for the first time since the conflict began,” Hynes added.

By Aparupa Mazumder

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