Oil Reversal Lowers, Market Sees Opportunity for US-Iran Peace
Oil prices reversed on Thursday (June 11th) after reports suggested the United States and Iran were continuing peace talks, despite the two countries having recently engaged in mutual attacks. This news eased some of the geopolitical risk premium that had previously driven oil prices higher in the Asian session.
At 4:43 a.m. Eastern Time, Brent for August fell 1.4% to US$91.76/barrel, while WTI weakened 1.3% to US$88.88/barrel. Both oil benchmarks had previously risen more than 2% in Asian trading and closed nearly 2% higher in the previous session.
A CNN report stated that the US and Iran were continuing negotiations regarding a potential peace deal. Reuters also reported that the two sides were discussing a preliminary agreement that would include a mechanism for releasing frozen Iranian funds. These diplomatic signals led the market to believe the risk of supply disruptions may have eased somewhat, although the situation remains fragile.
Uncertainty remains high as President Donald Trump continues to threaten further action if Iran does not accept the deal soon. The US previously attacked several Iranian military targets, calling it an act of "self-defense" after an American helicopter was downed near the Strait of Hormuz. Iran then reportedly retaliated with attacks on several US and allied military bases in the Gulf region.
The Strait of Hormuz remains a central risk area for the energy market. Iran claims to have blocked all shipping traffic in the waterway, but CENTCOM disputes this claim. If shipping traffic is truly disrupted, global oil supplies could tighten again. However, as long as ships can still pass through and diplomacy continues, oil price increases could potentially be contained.
From a fundamental perspective, US data continues to indicate tight supplies. The EIA reported that crude oil stocks fell by 7.2 million barrels in the week ending June 5, far exceeding expectations of around 3 million barrels. The market is also awaiting US PPI data and weekly jobless claims to see if rising energy costs are starting to amplify inflationary pressures and influence the direction of the Fed's policy.
Source: Newsmaker.id
