Oil Rebounds, Is US-Iran Deal Stalemate?
Oil prices rallied from a six-week low on Monday (June 1), as the market weighed the uncertain prospects for a peace deal to end the war in Iran. Brent rose to around US$93 per barrel after closing at its lowest level since mid-April on Friday, while WTI hovered near US$90.
The main driver came from flailing diplomacy: the US and Iran exchanged messages over the weekend proposing changes to a draft deal targeting an extension of the ceasefire and the reopening of the Strait of Hormuz. However, the market has seen no clear signs of progress, so the supply risk premium remains persistent.
This stalemate comes after a period of optimism that energy flows through Hormuz would recover, which triggered the first monthly decline in oil prices this year. However, Brent is still up more than a quarter since the war began in late February, reflecting the impact of the closure of the vital waterway on supply balances and market volatility.
Comments from President Donald Trump have added focus to the terms of the deal, including demands that Iran not acquire nuclear weapons, halt its nuclear program, and restore Hormuz as an open international shipping lane. Tasnim reported that amendments continue to be proposed by both sides, but the risk of the deal collapsing if the changes are rejected remains.
On the ground, regional escalation has kept sentiment fragile after Israel conducted its most extensive operation in Lebanon in a quarter-century, while Hezbollah stepped up attacks on northern Israel. Shipping security risks also remain high; some tankers have gradually managed to exit the Persian Gulf, but attacks on several passing vessels in recent days have underscored the real risks to commercial shipping.
Regarding price direction, the market faces a two-pronged risk: on the one hand, supply disruptions and shipping risks in the Middle East are supporting prices; on the other, concerns about weakening global demand are limiting upside. Goldman Sachs believes that demand pressures, reflected in weak April oil sales data in China and Western Europe, add downside risks to its fourth-quarter Brent forecast, although the Iran conflict still poses the potential for supply losses. In midday trading in Singapore, Brent for August rose around 2.1% to US$93.07, while WTI for July rose 2.6% to US$89.67. (asd)
Source: Newsmaker.id
