Brent declines on US-Iran diplomacy hopes and OPEC+ output hike
The front-month ICE Brent contract has fallen by $1.34/bbl on the day, to trade at $76.20/bbl at 09.00 GMT.
IMAGE: Getty Images
Upward pressure:
Oil prices have gained upward support as renewed fighting between the US and Iran has revived concerns over potential supply disruptions from the Middle East following a slowdown in shipping through the Strait of Hormuz.
Iranian armed forces launched attacks on US military infrastructure in Gulf states on Thursday in response to US strikes on Iran's southern coastal and eastern provinces, further straining a three-week-old ceasefire. Separately, Iranian media reported multiple explosions across southern Iran, including in Bushehr, home to one of the country's nuclear power plants, Reuters reported.
The renewed hostilities have delayed the full reopening of the Strait of Hormuz.
“The latest escalation in US-Iran military tensions this week raises new risks,” ING Bank commodity strategist Warren Patterson said.
Downward pressure:
Despite the renewed tensions, expectations that the US and Iran could return to diplomatic negotiations have weighed on market sentiment.
"Despite the US ramping up attacks on military sites in Iran, the market drew some reassurance from the Trump administration’s decision to avoid targeting Iranian energy infrastructure,” ANZ Bank senior commodity strategist Daniel Hynes said.
“US said to continue ‘technical talks’ with Iran despite trading air strikes,” VANDA Insights founder Vandana Hari commented.
Additionally, the US Energy Information Administration (EIA) reported a 3-million-bbl increase in commercial crude oil inventories to 411.4 million bbls in the week ending 3 July.
Brent futures came under further downward pressure after the Organization of the Petroleum Exporting Countries and its allies (OPEC+) agreed to raise oil production again in August. Seven members of the producer group will implement a combined production adjustment of 188,000 b/d next month.
By Tuhin Roy
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