ING: Oil - FJElite
Oil prices started the week stronger following the first military strikes between the US and Iran in a month. ICE Brent briefly moved back above US$90/bbl in early morning Asia trading. The US struck Iranian launchers over the weekend amid suggestions that Iran was about to launch mines into the Strait of Hormuz. Iran retaliated by launching missiles towards a US base in Jordan (these were intercepted). This reinforces concerns about a prolonged stalemate between both sides and, as a result, disruptions to energy flows from the Persian Gulf.
Obviously, the key is whether this ignites further rounds of strikes from both sides, and whether it leaves shippers hesitant to navigate the Strait of Hormuz. Oil producers in the region have grown more comfortable shuttling crude through the key chokepoint in recent weeks. Reports have 6-8m b/d transiting the strait, although we assume an average of 5m b/d.
Further escalation could put these flows under renewed pressure.
The latest positioning data shows that speculators reduced their net long in ICE Brent by 28,299 lots to 223,598 lots as of last Tuesday. The move was driven mainly by longs liquidating. The data covers a period when the market grew more hopeful about a resumption of talks between the US and Iran, along with signs of increasing oil flows from the Persian Gulf.
Unsurprisingly, Russia announced over the weekend that it would extend its ban on diesel exports by another month until the end of September 2026. This move will only add to the supply stress facing the global diesel market amid disruptions from the Persian Gulf and Russia. The market is moving toward stronger demand. This is being driven by harvesting in the Northern Hemisphere and planting in the Southern Hemisphere over the next couple of months, followed by winter demand. Russia is the second-largest diesel exporter. It’s battling fuel supply issues amid intensifying attacks by Ukraine on energy infrastructure.
European gas prices are also stronger in early morning trading following this weekend’s strikes in the Persian Gulf. LNG flows from the region remain significantly restricted, leaving the global LNG market tight. QatarEnergy also reportedly extended its force majeure for some buyers through until early November, signalling that the Northern Hemisphere is increasingly looking as though it will enter the 2026/27 winter without Qatari LNG supply. Tight supply entering the heating season leaves the market vulnerable to spikes higher later in the year.