Brent declines on hopes of progress in Iran talks

The front-month ICE Brent contract has lost by $7.66/bbl on the day from Friday, to trade at $108.88/bbl at 09.00 GMT.

IMAGE: Getty Images

Upward pressure:

Brent crude’s price has found some support from concerns that the oil market has little room left to absorb another supply shock.

The market has adapted to eight months of Middle East disruption, but its ability to absorb another shock “has diminished,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

Persian Gulf exports remain constrained, tanker availability is tight and global distillate inventories sit around 5% below their five-year average, Hynes added.

Besides, US President Donald Trump has also repeatedly threatened to restart strikes on Iran after the US midterm elections, scheduled for tomorrow, leaving more room for supply disruptions.

“The oil market is likely to remain nervous this week ahead of the US midterm elections,” two analysts from ING Bank noted.

Downward pressure:

Brent’s price has come under pressure on hopes of progress in talks to end the war between Iran, and the US and Israel.

Iranian negotiators left talks with Qatari mediators in Doha yesterday, but not because of difficulties in the negotiations, Reuters reported, citing an official briefed on the meeting.

“It remains to be seen whether this [diplomacy] will lead to anything,” ING Bank’s analysts said.

The front-month ICE Brent contract has changed from December to January, which goes a long way to explain today’s drop in price.

Brent's December contract was trading around $117/bbl on Friday. However, the January contract opened near $111/bbl today, accounting for much of the roughly $7/bbl decline. 

By Aparupa Mazumder

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