MUFG’s Lee Hardman highlights that Oil prices have fallen back toward USD80 per barrel as markets anticipate normalized flows through the Strait of Hormuz after the US-Iran agreement.
However, he argues that Oil is unlikely to return below USD70 because supply restoration will take time, inventories are depleted and a higher geopolitical risk premium is likely to persist
Energy markets price conflict de-escalation “The price of oil has continued to drop back towards USD80/barrel overnight reflecting building investor optimism that energy supplies will soon begin to normalize.” “However, we doubt it will return to pre-conflict levels below USD70/barrel given it will take time for supplies to come back on stream, inventories have been run down and a larger geopolitical risk premium will still be required to reflect the ongoing risk of the deal breaking down.” Author