Oil Holds Steady; Hormuz Tensions and Tight Supply Keep Prices High
Oil prices fluctuated during Wednesday's trading (Aug 19) as the market weighed the risk of escalation in the Middle East and uncertainty regarding supply flows through the Strait of Hormuz. Brent traded around US$91 per barrel after previously touching a three-week high. Over the past two weeks, Brent prices have risen approximately 15% as the likelihood of the regional conflict ending diminishes.
Sentiment soured further after the United Arab Emirates announced it would sever all economic ties with Tehran, following allegations that Iran had fired a ballistic missile into its territory. Meanwhile, US President Donald Trump confirmed there were no ongoing talks with Iran to end the conflict, heightening market concerns about potential prolonged supply disruptions.
Risks in the Strait of Hormuz also remain elevated. Three large China-linked tankers reportedly turned back in the waterway, while the UK had previously reported that a vessel exiting Hormuz was struck by a projectile, resulting in one fatality. Nevertheless, Gulf producers have managed to ship some oil through restricted channels, helping to prevent a more extreme price spike.
The expiration of the 60-day ceasefire between the US and Iran has added to the uncertainty. However, some traders have begun trimming long positions in anticipation of a possible sudden de-escalation, thereby capping oil's gains. The market is now factoring in scenarios involving a prolonged closure or disruption of the Strait of Hormuz, keeping the risk premium high.
Greater pressure is evident in refined products, particularly diesel. The Russia-Ukraine conflict and attacks on refineries have tightened supplies, pushing US diesel production margins past US$100 per barrel—an all-time high. In Europe, gasoil futures have more than doubled this year, driving up cost pressures for the transportation, agricultural, and industrial sectors. Newsmaker Analysis: The bias for oil remains bullish, though price movements are becoming increasingly volatile. As long as Brent holds above the US$90–US$91 range, the risk of escalation in the Strait of Hormuz and declining US inventories will continue to support prices. However, should signs of de-escalation emerge or shipping flows normalize, profit-taking could occur rapidly. Official US inventory data will serve as the next key catalyst in determining whether Brent can sustain its momentum toward higher levels. (gn)
Source: Newsmaker.id
