| Commoditiy | Price | Weekly Change | 50day-Ave | 100day-Ave | 200day-Ave |
|---|---|---|---|---|---|
| Brent ($/b) | 104.06 | -10.38 | 101.64 | 83.81 | 74.50 |
| US WTI ($/b) | 97.65 | -8.77 | 95.90 | 78.71 | 70.18 |
| ICE Gasoil ($/MT) | 1,200.75 | -108.25 | 1,229.69 | 949.96 | 820.00 |
| Jet CIF NWE ($/MT) | 1,260.52 | -142.55 | 1,441.59 | 1,085.40 | 902.49 |
Oil prices are sharply higher after Trump rejected Iran’s latest proposal. There is little detail known about the proposal. There have been reports that Iran offered to dilute some of its highly enriched Uranium and transfer and send the rest of its stockpile to a third country but rejected the idea of dismantling its nuclear facilities. Iran’s Tasnim news agency, the semi-official news agency associated with the Islamic Revolutionary Guard Corps, said this was not true. In any case whatever was in the proposal, Trump’s response on social media was very clear, he said “I don’t like it — TOTALLY UNACCEPTABLE!”. He did not specify exactly what he did not like but it could well be instance on maintaining nuclear facilities if that was in the proposal.
The market had been waiting for Iran’s response and perhaps hopefully for a path to a way to reopen the Strait, Brent traded around 100 \$/b. Hopefully despite Trump’s public disdain for Iran’s proposal that perhaps the exchange of views is leading to some kind of convergence between the two sides. If this exchange of proposals along with diplomatic pressure from other countries continues, perhaps an agreement can eventually be reached. It does however look like this could drag on and there is a risk of a military confrontation flaring up again.
We are now approaching the summer period in the northern hemisphere and the higher oil demand period, which includes the peak US driving season. Inventories have been drawing down, US gasolene and distillate inventories are unusually low for the time of year, the picture is similar in Europe. The physical market for crude does not look as tight as it did last month, the premium for oil for immediate delivery has reduced significantly. Buyers seem to be holding off from competing for barrels now, which might be because they expect to Strait to reopen and don’t want to overpay or it may be because refineries are reducing run rates and relying on inventories. This is of course not sustainable if the Strait remains closed and negotiations drag on. Even if it does open by the end of this month, the complexity of restarting the usual exports of crude and products is likely to lead to disruption continuing into the summer demand period. The result of this is that prices could experience more upward pressure again soon.
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