Renewed geopolitical tensions push Brent higher

The front-month ICE Brent contract has surged by $2.20/bbl on the day, to trade at $69.03/bbl at 09.00 GMT.

IMAGE: Oil barrels. Getty Images

Upward pressure:

Brent crude’s price has reversed the previous day’s losses to gain over $2/bbl as geopolitical tensions in the Middle East resurfaced.

The US government has ordered a partial evacuation of its embassy staff in Iraq due to rising security concerns in the Middle East, Reuters reports.

Besides, the United Kingdom Maritime Trade Operations (UKMTO) has advised caution to commercial vessels passing through the Persian Gulf, the Gulf of Oman and Straits of Hormuz. 

Both news come shortly after Iran threatened to strike US bases in the region if nuclear talks between the two countries fail, according to another Reuters report. US President Donald Trump has repeatedly threatened Iran with attacks if US-Iran nuclear talks don’t yield any positive outcome.

“Expectations of a new US-Iran nuclear [deal] are slowly evaporating. President Trump said he’s less confident about whether he can convince Tehran to agree on shutting down its nuclear program,” ANZ Bank’s senior commodity strategist Daniel Hynes remarked.

Downward pressure:

Rising OPEC+ crude oil output in recent months has put some downward pressure on Brent’s price.

The coalition agreed to collectively increase their supply by 411,000 b/d in July, compared to June’s production levels. It’s leader Saudi Arabia wants to increase oil supply to regain market share, according to market analysts.

With the latest round of output hike, OPEC+ will have increased supply by about 1.38 million b/d in the first four months of the phase out plan, "or 64% of the 2.2mb/d [2.2 million b/d] in voluntary production cuts,” Hynes said.

By Aparupa Mazumder

Please get in touch with comments or additional info to news@engine.online