The oil market “stays firmly in wait and see mode”, based on Ole R. Hvalbye, a commodities analyst at Skandinaviska Enskilda Banken AB (SEB).
In a SEB report despatched to Rigzone on Tuesday morning, Hvalbye highlighted that Brent crude is buying and selling barely greater in a single day, “up roughly $0.5 per barrel from yesterday’s shut”, including that, “because the finish of final week, costs have moved largely sideways to marginally greater, at present hovering round $71.7 per barrel”.
“A geopolitical threat premium is already embedded, with U.S-.Iran tensions persevering with to dominate headlines and form total threat sentiment,” Hvalbye identified within the report.
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“That mentioned, final week was notably sturdy. Since buying and selling opened every week in the past, Brent has gained round $4 per barrel, underlining how delicate the market stays to incremental developments,” he mentioned.
“Each headline is being parsed for alerts of escalation or de-escalation, and value motion displays precisely that, as renewed talks are scheduled this week alongside continued uncertainty round broader U.S. coverage,” he added.
Within the report, Hvalbye warned that rhetoric has sharpened once more.
“President Trump acknowledged that whereas he would like a deal, failure to succeed in one would have extreme penalties for Iran, echoing that the ultimate determination in the end rests with him. A tone which suggests rising stress forward of the following diplomatic spherical,” Hvalbye famous.
The SEB Commodities Analyst highlighted that the U.S. and Iran are set to renew talks in Geneva on February 26, however identified that, “regardless of the diplomatic monitor remaining open, alerts from Washington point out that navy planning stays energetic”.
The political backdrop complicates issues additional, based on Hvalbye.
“A broad Center East battle and a sustained oil spike can be damaging for U.S. voters forward of the midterms, one thing the White Home is conscious of,” he mentioned.
“On the similar time, vital navy property at the moment are positioned within the area, and rhetoric has been onerous to reverse with out tangible diplomatic progress,” he added.
“The chance isn’t essentially that battle is the bottom case, however that escalation turns into troublesome to unwind as soon as positioning and expectations are elevated. That’s the uncomfortable dynamic at present underpinning the geopolitical premium in oil,” he continued.
From a market perspective, the bodily construction nonetheless displays some tightness, Hvalbye acknowledged within the report.
“Brent stays [in] backwardation, though immediate spreads have eased considerably from the highs seen in January. Within the choices market, name skew stays elevated, suggesting that contributors proceed to hedge upside threat,” he mentioned.
“Total, diplomacy continues, however so does navy positioning. Buckle up for elevated volatility,” he warned.
In a Stratas Advisors report despatched to Rigzone by the Stratas workforce late Monday, the corporate highlighted that the worth of Brent crude oil ended the week at $71.24 per barrel after closing the earlier week at $67.73 per barrel.
“As flagged final week, U.S.-Iran tensions dominated the rally,” Stratas famous within the report.
“President Trump warned of a possible restricted navy strike if no nuclear deal is reached inside 10-15 days, backed by the biggest U.S. navy buildup within the Center East since 2003 (together with fighter jets, tankers, and repositioned property),” the corporate highlighted.
“Iran responded with naval drills … short-term Strait of Hormuz closures for coaching, and threats of retaliation,” Stratas added.
“Markets are pricing in elevated however contained uncertainty – a serious escalation disrupting Hormuz flows (carrying about 20 p.c of world oil) may drive Brent towards $100, however present ranges counsel a threat premium of $7-10 per barrel,” Stratas continued.
In a separate SEB report despatched to Rigzone on Monday, SEB Chief Commodities Analyst Bjarne Schieldrop warned that U.S.-Iran negotiations “don’t appear like they are going to be really easy” and added that the Iranian regime “doesn’t appear like it’s all that weak and much from able to fold its playing cards”.
He highlighted, nonetheless, that not one of the oil producing international locations within the Center East need to see waring actions escape.
Rigzone has contacted the White Home and the Iranian Ministry of Overseas Affairs for touch upon the SEB and Stratas stories. On the time of writing, neither have responded to Rigzone.
To contact the writer, electronic mail andreas.exarheas@rigzone.com
