Oil futures: Brent tops $88/b as crude rebounds from monthly lows
Quantum Commodity Intelligence – Crude oil futures Tuesday were climbing higher, as benchmarks rebounded from the monthly lows that came after the so-called risk premium dialled down on a de-escalation of tensions between Israel and Iran.
Front-month Jun24 ICE Brent futures were trading at $88.41/b (1840 GMT) on a range of $86.03-$88.50/b. This compared to the previous settle of $87/b and Monday's low of $85.79/b.
At the same time Jun24 NYMEX WTI was trading at $83.38/b, versus Monday's settle of $81.90/b.
"As we've seen previously, risk premiums don't often last long if supply is not likely to be impacted," commented City Index analyst Fiona Cincotta.
But regional tensions continued to fester as the IDF and Hezbollah exchanged fire on Israel's northern border. Israeli officials also told The New York Times that its original retaliatory plan against Iran included a much wider strike on military targets but decided to scale back the response.
The US is also in the process of imposing tougher oil sanctions against Iran. However, analysts said Washington would be mindful of any pricing impact during an election year, with the heavier barrels exported by Iran already seeing a global shortage.
"Anything that remotely causes oil prices to go up... I just don't see that they're going to enforce it strongly," Amrita Sen, head of research group Energy Aspects, told Bloomberg TV, noting that Chinese independent refiners are largely out of reach for the US banking system.
Sanctions are expected to target vessels involved in shipping Iranian oil, although analysts said similar measures against Moscow did little to stem flows of Russian oil without effective enforcement.
Fundamentals
Oil markets continued to find support from broader fundamentals, with OPEC+ keeping a lid on production, while wildfires could threaten Canadian oil sands production.
Focus has also pivoted back to the US demand outlook and the prospect of higher interest rates for longer, curbing economic growth. The firmer US dollar could also weigh on global demand.
Analysts have largely dismissed any possibility of a US rate cut when the Federal Open Market Committee (FOMC) meets at the end of the month, leaving rates unchanged at 5.25%-5.50%.
"Stubborn inflation and resilient economic activity through the first few months of the year have left the FOMC little reason to ease policy in the near term," said Wells Fargo in its latest report, adding it expects the FOMC to cut rates by 25 points in both September and December.
