Technology stocks booming again while Brent crude trades below $80 a barrel amid hopes for a Middle East interim deal
John Oh, an energy economist at Commonwealth Bank in Australia, said ship tracking numbers suggest oil flows through the strait of Hormuz have held up better than first thought, reaching an estimated 40% to 45% of pre-war levels last week.
We estimate that traffic flows only need to return to 50% to 60% of pre-war levels to assert oversupply conditions in global oil markets.
This helps explain why Brent oil futures are so quick to move into the $70s as markets are justified to price in oversupply worries when there are hopes that the strait will be officially re-opened.
Axios reported last night that the US is hoping for a Wednesday announcement of an interim deal that would see a temporary 60-day arrangement between Iran and Oman under which Gulf-bound vessels would pass through Iranian waters, whilst vessels leaving the Gulf would be able to travel through Omani waters with no fees being charged during the 60-day period. Similar details were reported earlier by the Wall Street Journal, though both reports leave unclear whether a long-term arrangement between Iran and Oman might then involve charging a toll for using the Strait.
Markets have seen plenty of false dawns throughout this conflict, so plenty of attention will be on whether a deal is announced imminently and its details. As of now, investors are increasingly pricing a solution…
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