Oil Rises for Third Day, Markets Grow Doubtful of Imminent US-Iran Deal
Oil prices rose for the third consecutive day as the market grew pessimistic about the chances of the US and Iran reaching a peace agreement soon, while tensions in the Middle East re-escalated. Brent strengthened near US$97/barrel, while WTI held around US$95/barrel after surging more than 7% in the first two sessions of the week.
The main drivers were a combination of a "poor deal" and military escalation. The US military reportedly intercepted Iranian ballistic missiles and drones heading towards neighboring countries, and attacked a command center in Iran in response. These developments increased the supply risk premium, especially as energy flows from the Persian Gulf have not yet returned to normal.
On the diplomatic front, Trump remained optimistic that an interim agreement could be reached soon, denying Iranian media reports that talks were stalled due to the Lebanon conflict. A new round of Israel-Lebanon talks is also scheduled for Wednesday, but the market views the situation as fragile and volatile.
As long as the status of the ceasefire extension and the future of tanker flows through the Strait of Hormuz remain unclear, oil prices will remain volatile. The delay in a resolution raises concerns that the world will have to continue depleting oil inventories while waiting for Gulf exports to fully recover, especially heading into the third quarter, which is typically supported by stronger seasonal demand.
Reports also suggest that Trump wants Iran to put specific nuclear concessions in writing as part of the initial agreement, after Iran was previously reported to have given verbal assurances. Meanwhile, volatility has caused market participants to reduce positions: Brent open interest fell to its lowest level since August, indicating that many parties are choosing to sit on the sidelines as price movements are heavily influenced by headlines.
In morning trading, August Brent rose around 1.2% to US$97.12/barrel, and July WTI rose 1.2% to US$94.93/barrel. (asd)
Source: Newsmaker.id
