ING analysts Warren Patterson and Ewa Manthey note that Brent has retreated sharply, briefly dropping below US$90/bbl as the US and Iran paused further strikes. They stress that disruptions in Russia and the Red Sea continue to constrain supply, while speculative net longs in Oil and ICE gasoil have increased, driven mainly by short covering and middle distillate tightness.

Brent retreats as risks stay elevated

"The price action in oil this morning clearly reflects the market's desperation for positive news. After 13 days of strikes, the US has held off on further strikes over the last 2 days, while Iran also paused retaliatory attacks. The recess has seen Brent retreat aggressively, down more than 7% at one stage, briefly below US$90/bbl."

"While this is the first tangible signal of de-escalation, the reasons behind it are less clear. There’s little explanation from the US. Also, it hasn’t yet led to any meaningful pickup in vessel flows through the Strait of Hormuz."

"We’re unlikely to see any recovery until there’s clarity on whether this de-escalation is more permanent and whether vessels can navigate the strait without fear of attack."

"Disruptions are piling up. Oil loadings at Russia’s Sheskharis terminal in Novorossiysk have reportedly been halted since 21 July. Bloomberg notes the facility has shipped roughly 650k b/d this year."

"This coincides with the suspension of oil loadings at CPC terminal, which had been shipping around 1.7m b/d in recent months. These disruptions come amid a surge in Ukrainian drone attacks on Russian energy infrastructure."

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