Crude Oil prices hold at one-week lows on Tuesday, after having depreciated more than 12% from last week’s highs.
The US benchmark West Texas Intermediate (WTI) barrel remains pinned near the $80 level at the time of writing as investors cling to hopes that the fragile truce in the Middle East will lead to a new round of peace talks
Market analysts, however, warn about the risks of overenthusiasm. Commodity experts at ING observe that “the oil market continues to sell off heavily,” as US President Donald Trump signals that talks are under way with a “good chance” of a deal. However, they warn that Trump also said that “strikes would resume in the event a deal fails to materialise.” Traffic through the Strait of Hormuz should resume to sustain lower Crude prices ING analysts add that for this move to be sustained, “we will need to see a recovery in flows through the strait,” and remind that “one would expect that the market will need to continue to price in a large risk premium, given that recent events have demonstrated how quickly a deal can unravel.” Societe Generale strikes a similarly cautious tone, arguing that “a return to pre-war and early July levels is a big ask without fully-fledged commitment to peace and re-opening of the Strait of Hormuz.” The bank’s commodity analysts estimate that “every month without a lasting resolution adds at least $10/bbl to Brent prices,” while also highlighting that President Trump “warned strikes on Iran would resume if a new ceasefire deal is not reached.” Past experiences suggest that tensions can re-escalate fast In the same line, Rabobank points out that while “energy prices have fallen by around $10/bbl from last week,” risks of “a full-scale re-escalation and persistent disruptions to the Strait of Hormuz, and the Bab el-Mandeb Strait, could fuel inflationary pressures in the US.” Rabobank also stresses that weekend announcements that Trump was “pausing” strikes on Iran “doesn’t mean that Iran has paused strikes…