Oil: Volatile swings on war headlines – Rabobank

Rabobank’s Senior Economist Maartje Wijffelaars highlights extreme volatility in Oil, with Brent dropping to $93 per barrel before spiking above $102 as shifting war headlines from Washington drive sentiment. He notes thin liquidity, algorithmic trading dominance and labels the recent fall from around $115 in Brent as premature, underlining ongoing risks around the Strait of Hormuz.

Brent swings on war and liquidity

"Oil markets are experiencing extreme volatility, reacting to every new – often conflicting – signal from the White House on the war’s outcome. Thin liquidity is amplifying these moves, as many traders have exited the market, leaving mostly algorithmic traders and oil producers. Meanwhile, Reuters reported yesterday that the amount and size of suspicious trading activity ahead of White House announcements about easing tensions – and subsequent oil price declines – was larger than previously thought, totalling about $7bn in March and April."

"Over the past 24 hours, Brent initially fell to a recent low of $93 per barrel on hopes of an imminent resolution, before surging to an overnight peak of $102.9 as those hopes faded. At the time of writing, Brent futures stand at $100.2 per barrel, down from around $115 earlier in the week – a move our energy strategists labelled premature."

"After Trump commented on Wednesday that a deal could be reached soon, tensions escalated again through (i) threats to bomb Iran if it rejects the recent one‑page US proposal, (ii) the introduction of a mandatory application to transit the Strait of Hormuz by the newly created “Persian Gulf Strait Authority,” (iii) reports that the US may revive Project Freedom to escort commercial vessels through Hormuz following renewed access to Gulf bases and airspace, and (iv) renewed exchanges of attacks involving Iran, the US, and the UAE in the Persian Gulf."

"Trump told ABC the ceasefire remains intact, while Iran’s Press TV – cited by Bloomberg – reported that it had been violated."

"So sit tight! Again! And watch how energy will still not flow through the Strait."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)