Brent: Prices extend sharp decline – Deutsche Bank

Deutsche Bank’s Early Morning Reid team, including Peter Sidorov and Jim Reid, note that Brent Oil has reversed more than half of its recent 13% rally as Middle East de-escalation headlines weigh on energy markets. The report highlights a potential biggest weekly drop since June, with associated declines in European natural gas and a supportive backdrop for global bonds and equities.

Middle East headlines drive energy selloff

"Markets turned more positive over the past 24 hours amid a flurry of more encouraging, if non-definitive, headlines on Iran, including a report that the US and Iran may announce a ceasefire in the coming days. This has left oil prices likely on course for their biggest weekly decline since June, with Brent crude down -8.6% since Friday as I type."

"In terms of yesterday’s market moves, Middle East developments were the key driver, as several headlines raised hopes for de-escalation. These included a couple of reports suggesting that the US administration does not expect renewed full-scale conflict with Iran."

"The New York Times reported that the US was preparing to send US diplomats back to the Middle East, while later in the day Axios reported that Secretary of State Rubio told allies that the US is not looking to initiate new strikes against Iran."

"Meanwhile, we heard that Iran and Oman discussed an “interim framework” aimed at resuming shipping through the Strait of Hormuz, with the initiative seeking to establish a “temporary joint maritime corridor” and to jointly work on clearing the strait of mines."

"And then, near the US close, Russia’s RIA Novosti reported, citing Iranian and Pakistani sources, that the US and Iran agreed a new ceasefire which is expected to be announced in the coming days and would include freedom of shipping via Hormuz."

"This amalgamation of stories pushed oil prices lower. Brent settled -3.89% lower yesterday and is trading another -2.60% lower at just over $86/bbl this morning, extending its decline following the RIA Novosti report. With a -8.6% decline so far this week as I type, Brent has reversed more than half of its +13% rise over the previous two weeks."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)