| Commoditiy | Price | Weekly Change | 50day-Ave | 100day-Ave | 200day-Ave |
|---|---|---|---|---|---|
| Brent ($/b) | 94.07 | -2.07 | 103.64 | 89.93 | 77.12 |
| US WTI ($/b) | 90.48 | -6.12 | 98.01 | 84.36 | 72.42 |
| ICE Gasoil ($/MT) | 1,049.75 | -15.50 | 1,228.67 | 1,026.19 | 854.31 |
| Jet CIF NWE ($/MT) | 1,121.00 | -28.82 | 1,393.90 | 1,169.80 | 942.78 |
Brent is trading around 93 \$/b this morning after oil markets have regained some of the losses from last week. The expiring July Brent contract reached a low of 91.44 \$/b at the end of last week and the August contract, which is now the front contract, fell to 89.93 \$/b on Friday. This is the lowest Brent has traded since mid-April when it very briefly fell to 86 \$/b. Of course, the focus for oil markets continues to be the latest developments on the progress on the US/Iran deal. There was considerable optimism about a deal last week, particularly on Friday evening, when Trump said a “final determination” would be made on a preliminary deal to extend a ceasefire with Iran and that “I will be meeting now, in the Situation Room”, but there was no news of an outcome before the market closed on Friday. Over the weekend there were reports that Trump had asked for further changes to the deal apparently relating to the Strait of Hormuz and the nuclear aspects. Brent is around 93.50 \$/b, so well above last week’s lows, pricing in some risk that closing the deal is not straight forward, but still largely consistent with it getting done.
In the meantime, we have seen more military action around the Persian Gulf. The US military says it has attacked Iranian radar and drone sites around the Strait of Hormuz. Kuwait reported missile and drone attacks as Iran’s Islamic Revolutionary Guard Corps (IRGC) says it has launched a retaliatory strike on a US air base. Chevron’s CEO, Mike Worth, highlighted the on-going risk in the Strait of Hormuz which countered a sense things were getting better, when he said that vessels were still being hit “They’re maybe not every day, but there have been multiple incidents that have occurred”. The commentary around the terms of an interim agreement between the US and Iran suggest it involves shipping in the Strait being normalised while there is a 60-day ceasefire during which a more comprehensive deal, addressing the nuclear issues and ending of sanctions, would be negotiated. Whether the shipping and insurance industries would have sufficient confidence in this ceasefire to navigate the Strait remains to be seen. Indeed, there have been reports that the deal includes a requirement for Iran to remove mines from the Strait within 30 days. This seems to admit that the Strait has been mined and clearing it will be a lengthy process. Therefore, there could be another month or two of constrained energy flows even if deal is agreed.
We saw Brent trading close to the lowest it has been since the war started last week, which is significant when you consider that the market is getting tighter all the time as the supply disruption eats into inventories. Brent is now not far above the 100-day moving average which is just under 90 \$/b. If a deal is signed with week, we could see further downside, below 90 \$/b, but it would not be a surprise to see it rebound again once the full complexity of mine clearance and reopening of the Strait becomes apparent. If the deal does not go through this week the market may become impatient at the lack of progress and prices rise through 100 \$/b again. Also, the war in the gulf might be on the verge of ending, but the war in Ukraine is not. Ukraine is becoming increasingly adept at striking Russian oil infrastructure. Russia has had to ban exports of jet fuel until the end of November to protect domestic supplies.
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