Oil Rebound Limited Ahead of US-Iran Deal
Oil prices recovered slightly on Wednesday (June 17th) after falling sharply over the past two sessions. However, the main pressure remains on the planned interim US-Iran peace deal, which could potentially pave the way for the return of Iranian oil supplies to the global market.
WTI is trading around $77 per barrel after hitting a three-month low. At 9:50 a.m. New York time, the July WTI contract rose 1.4% to $77.11 per barrel, while the August Brent contract rose 1.5% to $80.13 per barrel.
US President Donald Trump said the US could strike Iran again if he doesn't like Tehran's developments. The statement came ahead of the signing of the interim deal on Friday, which is said to offer Iran extensive financial incentives, including the right to immediately sell its oil.
The prospect of additional supply is a major factor behind the pressure on oil prices. Shipowners have begun repositioning fleets towards the Middle East in anticipation of the reopening of the Strait of Hormuz. If the route is fully opened, more than 100 oil-laden vessels from Middle Eastern countries other than Iran that are stuck in the Gulf could resume movement, adding effective supply to the market.
Signs of oversupply are beginning to appear in the market structure. The main timespread in the Dubai market has entered a contango structure, which typically indicates expectations of looser supply. Brent also headed towards a similar pattern on Wednesday, reinforcing the view that the market is beginning to reassess oil balances in the coming months.
The International Energy Agency warned that the conflict has put greater pressure on demand than previously expected. In its preliminary outlook for next year, the agency also predicted the potential for a new surplus, adding to fundamental pressures on oil prices.
Crude prices are now down nearly 40% from their peak during the conflict. According to Tamas Varga of PVM, this weakening is not only a reduction in geopolitical risk premiums but also a readjustment to global oil balances. If oil prices continue to weaken, inflation expectations could potentially fall, and pressure on consumer and producer prices could be more manageable.
Selling pressure is also being reinforced by technical factors. Technical traders added bearish positions, while Brent fell below its 200-day moving average for the first time since February. However, US oil stocks continued to decline rapidly, with industry groups estimating a drop of 8.3 million barrels last week, including a significant drop at Cushing, Oklahoma.
The market's next focus will be on the details of the 14-point US-Iran memorandum, the resilience of the peace deal, the pace of Hormuz's reopening, and official US oil stockpile data. As long as the prospect of additional supply from Iran and the Gulf remains dominant, any recovery in oil prices could be limited, even if there is a short-term rebound. (arl)
Source: Newsmaker.id
