Oil: Prices retreat on Gulf diplomacy – ING

ING analysts Warren Patterson and Ewa Manthey note that Oil prices are under renewed downward pressure, with ICE Brent breaking below $90/bbl as talks involving Iran, Oman and Pakistan on the Strait of Hormuz and the Middle East war progress. They highlight fragile Hormuz flows, question US flow estimates, and point to tighter US product markets despite rising crude inventories.

Brent slides as Hormuz risks evolve

"Oil prices continue to retreat, with ICE Brent settling 3.89% lower yesterday and breaking below $90/bbl. This downward pressure continued in early morning Asia trading today. The catalyst appears to be positive signals from Persian Gulf talks."

"However, any agreement between these two parties does not mean we will see normalisation in oil flows through the key chokepoint. We would likely need to see the US lift its blockade on Iranian ports and ease sanctions on Iran before we see any move towards normalisation."

"The US claims that an average of 8-9m b/d of oil is flowing through the Strait of Hormuz, which may be achievable over short time periods. However, over a longer time frame, this number seems aggressive. Several ship-tracking estimates are coming in much lower, ranging from 2m b/d to around 6m b/d."

"Overnight API inventory data show US crude oil inventories rose by 4.2m barrels over the last week. However, the products market tightened further, with gasoline and distillate inventories falling by 3.2m barrels and 500k barrels, respectively."