Oil prices are up as uncertainty over a U.S.-Iran deal to reopen the Strait of Hormuz revived supply-disruption concerns with both sides demanding compensation, Monte Safieddine, Head of Market Research at Capital.com, said in a market analysis sent to Rigzone on Tuesday.
In a separate market analysis sent to Rigzone on Monday, Waleed Said, Technical analyst at GivTrade, noted that crude’s jump yesterday was “pure Hormuz risk pricing”, adding that it was “a continuation of the story that dominated last week, not a fresh one”.
“This week, the risk cuts both ways: concrete progress on reopening the strait could unwind these gains fast, while further escalation keeps crude grinding higher, with the widening Brent-WTI spread the clearest sign of how much of this move is Middle East risk rather than global demand,” Said warned in the analysis.
In a report sent to Rigzone today, Bjarne Schieldrop, Chief Commodities Analyst at Skandinaviska Enskilda Banken AB (SEB) said the Strait of Hormuz doesn’t look like it will open any time soon “sending Brent crude sharply higher”.
“The Brent crude M1 contract has rebounded sharply since the middle of last week (+10 percent) following earlier sharp declines on hopes on an imminent deal between Iran and Oman on how to operate the SoH in the future,” Schieldrop noted in the report.
“Iran has made it very clear that an agreement with Oman does not lead to a reopening of the Strait before the U.S. complies with the MoU agreement between Iran and the U.S. from earlier this summer,” he added.
“Trump cannot agree to the MoU he signed onto without getting massive political criticism at home in the runup to the midterm elections, so that won’t happen,” he continued.
Schieldrop noted in the report that U.S. President Donald Trump is now “trying to fade the whole situation … stating that economic sanctions will have to do the job instead”.
He warned, however, that this is “a tedious and a very gradual process”.
Schieldrop also highlighted in the report that “factors which prevented exponential crude oil prices have started to fade”.
“Several of the factors which softened the blow from the closure of the SoH regarding crude oil may now start to fade,” he stated.
“The emptying of OECD SPR is starting to slow. China has started to import more, and a news story on Bloomberg today highlights that China Teapot refineries may start to buy more Iranian crude floating around waiting for a buyer in Asia,” he added.
“How much crude is really escaping out through the SoH is hard to pinpoint exactly. Shifting it from one VLCC per day to three VLCCs sneaking out lifts exports from two million barrels per day to six million barrels per day, which makes a whole lot of difference,” he pointed out.
Schieldrop did note in the report, however, that neither China nor the U.S. wants an exponential rally in crude oil and revealed that they have tools to prevent it.
“Two strong forces will … likely counter an exponential crude oil price rally,” he said.
“One, China does not want an oil price rally to $150 per barrel or higher to kill the global economy as it would badly hurt its $1.3 trillion surplus export industry while its domestic economy is weak,” he pointed out, noting that China would rather import less and draw down inventories further.
“Two, Trump doesn’t want an exponential crude oil price in the runup to the U.S. midterm elections,” he added, noting that the U.S. would rather put more SPR crude oil into the market to dampen it.
Rigzone has contacted the White House and the Iranian Ministry of Foreign Affairs for comment on Safieddine, Said, and Schieldrop’s statements. Rigzone has also contacted the International Press Center of China’s Ministry of Foreign Affairs and the Foreign Ministry of Oman for comment on Schieldrop’s statement. At the time of writing, none of the above have responded to Rigzone.
In a statement posted on his X page on August 7, U.S. Treasury Secretary Scott Bessent said “we will continue to increase the economic pressure [on Iran]”.
“Whether in dollars, rials, or crypto, Treasury will hunt down and dismantle the illicit financial networks that keep the regime afloat,” he added.
In a statement posted on his X page on August 10, Esmaeil Baqaei, the spokesperson for Iran’s foreign ministry, said, “the U.S. Secretary of the Treasury has boasted of ‘suffocating’ Iran through economic sanctions”.
“Beyond its sheer pathos, the claim is a stark testament to America’s compulsive addiction to sanctions … Iran has demonstrated over decades that it will not be strangled by these exhausted refrains,” he added.