【Trump has been talking tough for so long without striking. If he’d struck earlier, oil prices would have fallen sooner】
Brent crude $BZ pulled back from last week’s high of nearly $117, at one point trading at $114.81 on October 27. Signals of a thaw in U.S.-Iran negotiations gave oil prices some relief, but don’t celebrate just yet: progress in talks and the reopening of the Strait of Hormuz are two different things.
Officials from Saudi Arabia, Turkey, and Pakistan traveled to Tehran to mediate. Iran is willing to discuss reopening the strait, but wants the U.S. to lift its naval blockade of Iranian ports. The two sides have not even agreed on the order of implementation. The strait previously handled about one-fifth of global energy shipments; Reuters says traffic is currently only around 60% of normal levels. Disrupted supplies cannot be restored overnight just by talking about peace.
Oil prices are falling for now because the market is pricing in the possibility that supply risks will ease—not because supplies have already recovered. The risk of Houthi attacks on Saudi energy facilities remains, and oil prices are still high. What could actually drive prices lower from here is a deal being implemented, more tankers passing through, and exports recovering. If talks stall again or attacks on energy facilities escalate, the risk premium that has just been squeezed out could quickly return.
Brent crude $BZ pulled back from last week’s high of nearly $117, at one point trading at $114.81 on October 27. Signals of a thaw in U.S.-Iran negotiations gave oil prices some relief, but don’t celebrate just yet: progress in talks and the reopening of the Strait of Hormuz are two different things.
Officials from Saudi Arabia, Turkey, and Pakistan traveled to Tehran to mediate. Iran is willing to discuss reopening the strait, but wants the U.S. to lift its naval blockade of Iranian ports. The two sides have not even agreed on the order of implementation. The strait previously handled about one-fifth of global energy shipments; Reuters says traffic is currently only around 60% of normal levels. Disrupted supplies cannot be restored overnight just by talking about peace.
Oil prices are falling for now because the market is pricing in the possibility that supply risks will ease—not because supplies have already recovered. The risk of Houthi attacks on Saudi energy facilities remains, and oil prices are still high. What could actually drive prices lower from here is a deal being implemented, more tankers passing through, and exports recovering. If talks stall again or attacks on energy facilities escalate, the risk premium that has just been squeezed out could quickly return.