Brent’s rally cools after Trump drops Hormuz fee plan

The front-month ICE Brent contract has declined by $2.52/bbl on the day, to trade at $84.68/bbl at 09.00 GMT.

IMAGE: Oil storage facility. Getty Images

Upward pressure:

Brent crude has continued to trade well above $80/bbl mark as tension in the Middle East remained fairly elevated.

Another commercial vessel came under attack while transiting the Strait of Hormuz, 13 nautical miles (NM) southeast of Limah, Oman yesterday, the United Kingdom Maritime Trade Operations (UKMTO) reported.

“Observable traffic in the strait [of Hormuz] all but ceased,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

Earlier this week, a tanker was approached by six small boats about 50 NM south of Aden, Yemen. One small boat has fired warning shots, the UKMTO reported. “The other 5 small boats have remained at 1NM,” it added.

“The recent attacks on ships by both Iran and the US are making these journeys increasingly risky,” Hynes added.

Downward pressure:

Brent’s rally has lost some steam after US President Donald Trump cancelled plans to impose a 20% fee of a cargo’s value for the US to assist in safely transiting the Strait of Hormuz.  

Trump walked back from his previous comments, replacing the 20% “reimbursement fee” with trade deals with the various Gulf countries.

Oil broke above $85/bbl earlier this week after Trump proposed the fee and named the US “guardian of the Hormuz Strait.”

The US President did not disclose the specifics of the trade and investment deals that he claims Gulf nations will be striking with Washington.

Washington is signalling that “it is willing to compromise,” after Trump backed away from his latest plan, Hynes remarked.

By Aparupa Mazumder

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