Brent oil prices edged up as the European session got underway, trading just above $105 per barrel. Today’s modest move follows yesterday’s sharp drop of almost 5%, driven by growing optimism that a deal may soon be reached between the United States and Iran to allow the reopening of the Strait of Hormuz. Such a scenario would restore the flow of oil from the Persian Gulf and ease the supply-side pressures that have driven prices higher. The news was welcomed by oil traders, particularly after the EIA revealed earlier this week that US crude stockpiles had fallen by more than 4 million barrels compared with the previous week. Against this backdrop, traders will remain alert to developments in the negotiations between the US and Iran. Further positive news could push prices lower, although the downside remains limited by expectations that, even after the reopening of the Strait of Hormuz, a full normalisation of oil exports from the region is likely to take several months. On the other hand, signs of escalation could undermine optimism over a near-term resolution to the standoff between the parties and the reopening of the strait, potentially reversing the recent decline in prices.
Ricardo Evangelista, ActivTrades
Source: ActivTrader
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