Brent Erases Gains, De-escalation Hopes Emerge
Oil erased early gains on Wednesday (March 4) after reports that Iran had indirectly contacted the US to discuss terms for an end to the war in the Middle East, although the conflict still threatens global energy flows. Brent held around US$81 per barrel after surging in the previous two sessions, as the market weighed the chances of a de-escalation versus a physical disruption in the supply chain.
The New York Times reported that Iranian Intelligence Ministry operatives contacted the CIA through another country's intelligence agency to offer talks. This signal dampened some risk premiums, but it hasn't changed the fact that shipping and production in the region remain under pressure.
On the infrastructure risk front, Saudi Arabia said there was an attempted attack on the Ras Tanura refinery. The kingdom also confirmed a diversion of supplies from the Persian Gulf to the Red Sea as part of a plan to keep operations running. In Asia, an Indian refinery informed customers that it was suspending fuel exports as global prices surged.
Oil markets remain volatile as the US-Israel war against Iran has triggered attacks and retaliation in Gulf states, forcing some producers to shut down output and nearly halting traffic in the Strait of Hormuz. President Donald Trump said on Tuesday that the US International Development Finance Corporation would offer insurance for ships to maintain the flow of energy and trade, and provide maritime escorts if needed. However, the shipping industry considers this a partial solution at best, as the details of the plan remain unclear.
Reliance on the restoration of the Hormuz Flow becomes crucial as storage capacity begins to fill. Kayrros reports that key storage sites in Saudi Arabia are filling rapidly, while Goldman Sachs expects Brent to remain in the $80s in March amid mixed signals: the potential for a gradual recovery of the Hormuz Flow is confronted by evidence of production cuts. As of 8:35 a.m. New York time, May Brent was trading at $81.56 per barrel, and April WTI was around $74.36 per barrel.
Source: Newsmaker.id
