Oil Prices Continue to Fall, Optimism for US-Iran Negotiations Strengthens
Oil prices continued to weaken after US President Donald Trump stated that Washington and Tehran were in talks to end the Middle East conflict. Brent was trading around US$87 per barrel after plunging 8.7% on Monday, while WTI was near US$81 per barrel.
Trump assessed that there was a strong chance of progress in the talks. However, he also warned that the United States could attack the Pickaxe Mountain facility if a deal was not reached, so the risk of escalation has not completely disappeared.
Regional tensions continue to cloud the market after satellite imagery showed smoke rising from several Saudi Arabian energy facilities following the latest attack. Meanwhile, tanker traffic through the Strait of Hormuz has not returned to normal, and some vessels are suspected of passing without their transponders activated.
Market participants also reduced their long oil positions. Kpler data shows that long Brent positions from trend-based trading advisors fell to 62% from 73%. Selling pressure could increase if oil prices fall further by around 3%.
Market Impact
Diplomatic optimism has the potential to keep oil prices depressed in the short term. However, disruptions in the Strait of Hormuz, threats of attacks on energy facilities, and limited reserves could trigger another price spike. The oil price decline also has the potential to ease inflation, pressure energy stocks, and support risk assets and gold.
Source: Newsmaker.id
