ING’s Warren Patterson and Ewa Manthey say the outcome of US-Iran nuclear talks will be crucial for Oil, with a sizeable risk premium at stake. They note that ICE Brent timespreads signal better supply, while fundamentals and OPEC+ decisions could push prices lower if tensions ease. Recent US inventory data also shape the broader energy backdrop.
US-Iran scenarios drive Oil outlook
“It’s a big day for oil markets with all eyes on US-Iran nuclear talks, which are scheduled for later today. A constructive resolution would likely prompt the market to gradually unwind as much as a $10/bbl risk premium, which we believe is currently priced in. If talks break down, the upside risk remains, but the market may hold off on a full reaction until the scale of potential US action against Iran becomes clearer.”
“Targeted and brief strikes that avoid energy infrastructure (like those seen last year) with limited retaliation from Iran, would likely provide a brief spike higher in oil prices. The move, though, would likely be short-lived. Longer-term action from the US, with more aggressive retaliation from Iran, would increase supply risks for the oil market.”
“While the flat price remains well supported amid geopolitical uncertainty, ICE Brent timespreads have come under much more pressure recently, suggesting the physical market is becoming increasingly well supplied. Kazakh oil flows from the CPC terminal are normalising following disruptions earlier this year. Floating storage continues to decline, indicating that previously stranded sanctioned barrels are finally finding buyers and moving toward their destinations.”
“If we are to see de-escalation between the US and Iran, it should allow weaker fundamentals to feed through to a lower flat price — particularly if OPEC+ resumes supply increases from April, which we believe they will agree to this weekend.”
“Yesterday’s inventory data from the Energy Information Administration (EIA) was bearish. The EIA reported that US crude oil inventories increased by 15.99m barrels over the last week- the largest weekly increase since February 2023. The increase was dominated by inventory builds on the Gulf Coast.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Source: https://www.fxstreet.com/news/oil-us-iran-talks-steer-price-risks-ing-202602261009
