Brent gains as oil flows through Hormuz stall

The front-month ICE Brent contract has gained by $0.32/bbl on the day, to trade at $72.89/bbl at 09.00 GMT.

IMAGE: Oil storage tanks. Getty Images

Upward pressure:

Brent crude’s price has traded higher this week, as crude oil movement through the Strait of Hormuz faced some constraints after Iran struck two commercial vessels with drones over the weekend.

The Panama-flagged oil tanker M/T Kiku, and the Singapore-registered container ship Ever Lovely, came under attack after Iran’s navy issued a warning to commercial vessels last week, cautioning them against using unauthorised routes to transit the strait.

“Crude oil prices gained as renewed fighting in the Middle East raised concerns about the sustainability of oil supplies flowing through the Strait of Hormuz,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

In response to these vessel attacks, the US Central Command (CENTCOM) launched strikes on Iranian military targets, including air defense sites and surveillance infrastructure. 

“Traffic through the Strait remains well below last week's post-war peak,” VANDA Insights’ founder Vandana Hari commented.

Downward pressure:

Brent’s price has felt some downward pressure from the latest positions data, as money managers and hedge funds decreased their net-long bets on ICE Brent futures over the last reporting week.

Speculators sold more than 23,000 lots as of 23 June, decreasing net-long positions in Brent futures to a little over 90,000 lots, according to futures and options data from ICE Futures Europe.

When speculators reduce net-long positions, prices tend to decline. Conversely, when they boost these positions, oil prices typically rise, leading to a cycle where their actions can influence oil prices and the market.

By Aparupa Mazumder

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