Brent moves higher amid Middle East escalations

The front-month ICE Brent contract has gained by $2.74/bbl on the day, to trade at $106.89/bbl at 09.00 GMT.

IMAGE: Oil pumpjacks. Getty Images

Upward pressure:

Brent’s price has continued to move higher on the prospect of further escalation in the Middle East, with the Strait of Hormuz already shut by Iran and additionally subject to a US blockade.

US President Donald Trump told reporters that ceasefire with Tehran is on “life support,” the BBC reported. The news has raised fresh concerns in the oil market and pushed Brent’s price higher.

“The escalation in tensions raised concerns that oil supplies from Persian Gulf producers will remain curtailed for the foreseeable future,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

Meanwhile, Iran’s speaker of parliament Mohammad Bagher Ghalibaf has warned the US of a “well-deserved” response to any further aggression.

“While there is a trickle of vessels transiting the strait, it is a fraction of the pre-conflict traffic,” Hynes added.

Downward pressure:

Trump is expected to meet Chinese President Xi Jinping during a state visit to Tiananmen Square in Beijing later this week. The news has put some downward pressure on Brent’s price.

“While optimism for an imminent deal is fading, there remains a glimmer of hope that talks between Trump and Chinese President Xi later this week could yield positive results on Iran,” two analysts from ING Bank said.

The visit is expected to include discussions aimed at providing greater clarity on the ongoing Middle East situation and laying the foundation for future cooperation.

“The hope is that China can use its influence over Iran to push it closer towards a peace deal,” ING Bank’s analysts said.

By Aparupa Mazumder

Please get in touch with comments or additional info to news@engine.online