Oil: Prices steady after sharp conflict-driven selloff – ING

ING analysts Ewa Manthey and Warren Patterson note that Oil and gas prices dropped sharply as Iran considered a new US proposal that could gradually reopen the Strait of Hormuz and ease supply risks. They highlight tightening US crude inventories, OPEC output at multi‑decade lows, and subdued US natural gas prices, with energy markets expected to stay highly sensitive to US–Iran headlines.

Oil pressured by peace deal prospects

"Oil and gas prices fell sharply on Wednesday as Iran considered a new US proposal to end the conflict, raising hopes that flows through the Strait of Hormuz could gradually resume. Brent dropped below $100/bbl to trade at $96 a barrel at one point, and European gas also slumped as the market priced in a lower risk of prolonged disruption to Middle Eastern energy flows. But oil prices steadied Thursday morning around $100 a barrel, after losing almost 8% in the previous session."

"The US proposal is understood to include a one-page memorandum that would, if accepted by Iran, lead to a gradual reopening of Hormuz and the lifting of US restrictions on access to Iranian ports. Iran is expected to respond through a mediator in the coming days, although no agreement has been reached and more detailed negotiations, including on Iran’s nuclear programme, would still follow."

"The sell-off partly unwinds the conflict-driven rally in energy prices, but losses were pared as the market remains cautious. Crude inventories in the US continue to tighten, while buyers have become more reliant on US barrels to offset disrupted Middle Eastern supply."

"EIA data showed US commercial crude inventories fell by 2.3m barrels last week, smaller than the 8.1m-barrel draw reported by the API and slightly below market expectations of a 2.4m-barrel decline. The modest draw reflected a sharp fall in exports, which dropped by 1.7m b/d WoW after hitting a record high the previous week."

"Energy markets are likely to remain headline-driven. A deal that restores traffic through Hormuz would reduce the supply-risk premium, but any delay or setback in talks could quickly put upward pressure back on oil and gas prices."