Oil Steady, US-Iran Uncertainty Key to Supply Risk
Oil prices held steady on Tuesday (June 2nd) after posting their biggest daily gain in about a month, as the market reassessed the risk that supply disruptions from the Persian Gulf could persist for a longer period. Brent for August traded around US$95/barrel after rising 4.2% in the previous session, while WTI was just below US$92/barrel.
Monday's surge was triggered by a Tasnim report that Tehran had halted talks with Washington in protest of Israel's attack on Lebanon. However, the rally later pared some of the gains after US President Donald Trump said negotiations were still ongoing, asserting that the market was still very headline-driven and easily swayed from one statement to another.
Trump also told ABC News that a memorandum of understanding (MoU) to reopen the Strait of Hormuz was likely within the next week, although the US still needed to resolve "a few points." Uncertainty over the extension of the ceasefire—and particularly the future of energy flows through Hormuz—was a key factor driving prices, after oil briefly declined last month on optimism about a deal.
Tasnim also raised the issue of completely closing the Strait of Hormuz and even Bab el-Mandeb at the southern tip of the Red Sea, a crucial alternative route when Hormuz is choked. This issue heightens market concerns by increasing the risk of disruption to not just one chokepoint, but two major routes at once.
CIBC analysts believe that if there are signs that both sides are no longer actively negotiating, the market could lose the "safety blanket" that has been keeping prices skewed toward the best-case scenario. Confusion increased after Trump and Israeli Prime Minister Benjamin Netanyahu offered differing versions of the call regarding Lebanon, while the Lebanese presidency said the US-mediated ceasefire should be extended from Beirut to all of Lebanon, with further negotiations scheduled for Tuesday and Wednesday.
In Asian trading at 8:29 a.m. in Singapore, August Brent fell slightly by 0.1% to US$94.86/barrel, while July WTI fell 0.3% to US$91.90/barrel. (asd)*
Source: Newsmaker.id
