Oil Holds High, Trump Doubts US-Iran Ceasefire
Oil prices held high after US President Donald Trump cast doubt on the sustainability of the ceasefire with Iran, prompting the market to reassess the risk of supply disruptions from the Gulf region, particularly as flows in the Strait of Hormuz remain severely disrupted.
Brent traded above US$104 per barrel after rising 2.9% in the previous session, while WTI hovered around US$98 per barrel. Trump called the ceasefire on “massive life support” and deemed Iran’s response to the US peace proposal inadequate.
Although the ceasefire has been in effect since early April and has held despite several incidents, including attacks on ships, the “near-closed” state of the Strait of Hormuz is considered sufficient to disrupt oil, gas, and fuel shipments to global customers, while also fueling concerns about inflationary pressures.
According to sources familiar with the talks, Iran is asking the US to lift its naval blockade and ease sanctions, while maintaining a degree of control over traffic in the Strait of Hormuz. Bloomberg Economics assesses a remote possibility of a comprehensive peace deal, and the risk of a return to hostilities remains, although the intensity is expected to be temporary before a decline to a lower level of conflict.
On the US side, Axios reports that Trump will meet with his national security team to discuss the war, including the option of resuming military action. Trump also said he is reviewing plans to escort ships through the strait, amid rising US fuel prices that are adding political pressure ahead of the November midterm elections.
However, there are signs that market forces are weakening. Some refiners are said to be reducing purchases, as evidenced by the Brent prompt spread falling to around US$4 per barrel (backwardation), compared to a peak of nearly US$10 last month. Saudi Aramco CEO Amin Nasser stated that the market is losing 100 million barrels of supply per week due to the disruption of Hormuz, while some shipments are being diverted to western Saudi ports, and some buyers, including China, are taking lower volumes.
5 key points:
- Trump casts doubt on the US-Iran ceasefire, increasing the geopolitical risk premium.
- Brent remains above US$104 and WTI around US$98 after the previous session's rally.
- Disruptions in the Strait of Hormuz are squeezing global oil/gas flows and raising inflation risks.
- The US is considering security options (ship escorts) and emergency supply measures, while sanctions related to Iranian oil sales to China are increasing.
- Market strength indicators are weakening: prompt spreads are narrowing as refineries reduce purchases, even though supply risks remain dominant. (asd)*
Source: Newsmaker.id
