Oil price ‘may fall to $60 a barrel’ as voyages through the strait of Hormuz jump – business live
Introduction: Oil may fall to $60 a barrel, Citi says
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Hopes of peace in the Middle East have been pushing oil down in recent weeks, and there could be further falls to come!
Analysts at Citigroup have predicted that Brent oil could fall to $60 a barrel by the end of the year, a level last seen in January. Brent has already fallen from $126/barrel at the end of April to $72 this morning, wiping out its jump after the Iran war began.
As Citi’s Francesco Martoccia puts it:
“Fundamentals are rapidly reasserting themselves.
Shipping flows are normalizing, Chinese buyers remain absent, physical crude markets have weakened sharply, and inventories have drawn far less than expected.”
Crude price have fallen following the resumption of flows through the strait of Hormuz, as the US and Iran try to agree a peace deal.
On Wednesday the two sides held a round of indirect talks in Doha, discussing maritime traffic in the Strait of Hormuz and unfreezing Iran’s funds.
Those talks have now been paused, as Iran holds a funeral ceremony for Ali Khamenei’s, the supreme leader who was killed on the first day of the conflict.
There is still the risk that the conflict re-escalates (as we saw last weekend when a new round of escalating strikes between Iran and the US rocked the region).
James Hosie, equity analyst at Shore Capital, warned that oil could push higher if the talks stalled, telling clients:
The current US-Iran ceasefire remains fragile after an Iranian drone strike on a Panama-flagged oil tanker last week was followed by both sides targeting regional military sites. At this stage, the attacks do not appear to have materially disrupted vessel owners’ willingness to navigate the Strait.
A return of blockades could cause a spike in Brent back above $100 per barrel, although we would anticipate markets pricing in such disruption with the assumption that it is very temporary and becoming a catalyst for further ceasefire talks.
A breakdown in diplomacy leading to a resumption of daily missile strikes between the US or Israel and Iran could result in a return to higher oil prices for a more sustained period.
The agenda
-
9am BST: UN’s FAO Food Price Index
-
9am BST: Eurozone service PMI report for June
-
9.30am BST: UK service PMI report for June
Key events
Chart: How oil fell back to pre-war levels
Voyages through the Strait of Hormuz have increased
Voyages through the Strait of Hormuz have more than quadrupled in the past week amid growing confidence in the US and Iran’s 60-day ceasefire, the Financial Times reports.
The number of traceable journeys by ships passing into and out of the Gulf each day has increased from between one and two for the majority of the conflict to eight on July 1, according to a moving seven-day average from maritime data platform Signal.
Also, the number of transits into and out of the Gulf including ‘dark voyages’ reached a total of 258 in the week to June 28, up from 41 in the first week of the crisis in March, according to data from Lloyd’s List Intelligence.
Introduction: Oil may fall to $60 a barrel, Citi says
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Hopes of peace in the Middle East have been pushing oil down in recent weeks, and there could be further falls to come!
Analysts at Citigroup have predicted that Brent oil could fall to $60 a barrel by the end of the year, a level last seen in January. Brent has already fallen from $126/barrel at the end of April to $72 this morning, wiping out its jump after the Iran war began.
As Citi’s Francesco Martoccia puts it:
“Fundamentals are rapidly reasserting themselves.
Shipping flows are normalizing, Chinese buyers remain absent, physical crude markets have weakened sharply, and inventories have drawn far less than expected.”
Crude price have fallen following the resumption of flows through the strait of Hormuz, as the US and Iran try to agree a peace deal.
On Wednesday the two sides held a round of indirect talks in Doha, discussing maritime traffic in the Strait of Hormuz and unfreezing Iran’s funds.
Those talks have now been paused, as Iran holds a funeral ceremony for Ali Khamenei’s, the supreme leader who was killed on the first day of the conflict.
There is still the risk that the conflict re-escalates (as we saw last weekend when a new round of escalating strikes between Iran and the US rocked the region).
James Hosie, equity analyst at Shore Capital, warned that oil could push higher if the talks stalled, telling clients:
The current US-Iran ceasefire remains fragile after an Iranian drone strike on a Panama-flagged oil tanker last week was followed by both sides targeting regional military sites. At this stage, the attacks do not appear to have materially disrupted vessel owners’ willingness to navigate the Strait.
A return of blockades could cause a spike in Brent back above $100 per barrel, although we would anticipate markets pricing in such disruption with the assumption that it is very temporary and becoming a catalyst for further ceasefire talks.
A breakdown in diplomacy leading to a resumption of daily missile strikes between the US or Israel and Iran could result in a return to higher oil prices for a more sustained period.
The agenda
-
9am BST: UN’s FAO Food Price Index
-
9am BST: Eurozone service PMI report for June
-
9.30am BST: UK service PMI report for June
