Brent gains as Iran threatens to expand conflict

The front-month ICE Brent contract has gained by $0.94/bbl on the day, to trade at $96.32/bbl at 09.00 GMT.

IMAGE: Oil storage tanks. Getty Images

Upward pressure:

Brent has gained in the previous session after Iran threatened to disrupt global shipping routes beyond the Strait of Hormuz, including the Persian Gulf, Gulf of Oman, and the Red Sea.

Iran’s military commander Ali Abdollahi has warned that Tehran will “not tolerate any US-led maritime blockade” targeting Iranian commercial and oil tankers in the Persian Gulf, Gulf of Oman, or Red Sea, state-owned news agency Tasnim reported.

“The longer the conflict drags on, the more persistent these price dynamics are likely to be,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

Oil felt further upward pressure after the US Energy Information Administration (EIA) reported a decline in US crude stocks. Commercial US crude oil inventories decreased by 900,000 bbls to 464 million bbls in the week ending 10 April, according to data from the EIA.

“The oil market doesn’t need a worst-case escalation to justify higher pricing. Tight balances are sufficient to sustain the price of Brent near or above recent threshold levels,” Hynes said.

Downward pressure:

Hopes of de-escalation in the Middle East conflict has capped some of Brent’s price gains today, as market participants eye a potential resumption in talks to bring an end to the conflict. 

Oil market analysts continue to hope that the US and Iran will extend their ceasefire by another 2 weeks, two analysts from ING Bank said.

US President Donald Trump said in an interview with Fox News said that the war is “very close to over,” suggesting that a fresh round of negotiation may be held this week.

“Oil prices continue to move lower amid signals that a ceasefire between the US and Iran will be extended,” ING Bank analysts said.

By Aparupa Mazumder

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