Oil prices rise as investors weigh Middle East peace prospects
Add BT as a preferred source
[TOKYO] Oil prices rose over US$1 on Thursday (May 7), rebounding from the Wednesday’s sharp losses, as investors weighed the prospects of a Middle East peace deal succeeding.
Brent crude futures were up $0.78, or 0.8 per cent, at US$102.05 a barrel at 0400 GMT. US West Texas Intermediate gained $0.76, or 0.8 per cent, to US$95.84 a barrel.
Both benchmarks slumped more than 7 per cent on Wednesday, hitting two-week lows on optimism over a possible end to the Middle East war. They pared losses, however, after US President Donald Trump said it was “too soon” for face-to-face talks with Teheran and a senior Iranian lawmaker said the US proposal was more of a wish list than a reality.
“While peace negotiations are likely to continue at least until next week’s US-China summit, the outlook beyond that remains uncertain,” said Hiroyuki Kikukawa, chief strategist of Nissan Securities Investment, a unit of Nissan Securities. Trump and Chinese President Xi Jinping are scheduled to meet in Beijing on May 14 and 15.
“The main scenario is that oil prices will remain elevated,” Kikukawa said. Iran said on Wednesday it was reviewing a US peace proposal that sources said would formally end the war while leaving unresolved the key US demands that Iran suspend its nuclear programme and reopen the Strait of Hormuz.
An Iranian foreign ministry spokesperson cited by Iran’s ISNA news agency said Teheran would convey its response. Trump said he believed Iran wanted an agreement. A Pakistan mediation source and another person briefed on the talks said an agreement was close on a one-page memorandum that would formally end the conflict.
Navigate Asia in
a new global order
Get the insights delivered to your inbox.
US media outlet Axios reported that the US expects Iranian responses on several key points in the next 48 hours, citing sources saying this is the closest the parties had come to an agreement since the war began. “From a broader perspective, oil markets have remained stuck between diplomacy and disruption for more than two months, with investors’ emotions being manipulated by headlines almost daily,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.
“If a formal deal eventually materialises, oil prices could witness a free fall as geopolitical premiums rapidly evaporate from the market. However, any fresh signs of attacks on oil infrastructure or escalation in the Middle East could easily trigger another parabolic spike in crude prices.”
Even if a peace deal is reached, oil supplies are expected to tighten further in coming weeks because it will take weeks for oil shipments to resume from the Middle East Gulf and reach refiners worldwide - so oil companies will continue to deplete storage tanks to meet peak summer demand.
US crude and fuel inventories continued to decline last week as countries sought to offset supply disruptions caused by the Iran crisis, the US Energy Information Administration said on Wednesday.
Crude stocks fell by 2.3 million barrels to 457.2 million barrels last week, compared with analyst expectations in a Reuters poll for a 3.3 million-barrel draw. REUTERS
Decoding Asia newsletter: your guide to navigating Asia in a new global order. Sign up here to get Decoding Asia newsletter. Delivered to your inbox. Free.
Share with us your feedback on BT's products and services
TRENDING NOW
On the board but frozen out: The Taib family feud tearing Sarawak construction giant apart
Are Keppel’s dividends truly unsustainable – or just misunderstood?
UOB Q1 net profit dips 4% to S$1.44 billion; beats expectations
Sony, Singapore’s GIC to pay almost US$4 billion for Bieber, Neil Young catalogue
