Crude Falls as Middle East Risk Premium Reduces

Oil prices have fallen towards the lows of $86/09/bbl seen last week as some of the geopolitical risk premium linked to Middle East supply fears has unwound after an Israeli retaliatory strike on Iran last week was downplayed.

• Brent JUN 24 down 1.3% at 86.19$/bbl
• WTI JUN 24 down 1.4% at 81.11$/bbl
• Gasoil MAY 24 down 1.3% at 770.5$/mt
• WTI-Brent up 0.05$/bbl at -5.04$/bbl
• Conflict in the Middle East has so far had no impact on physical oil supplies from the region to the global market. Upside price pressure is also limited by global demand growth uncertainty and a possible delay to Fed cuts this year.
• New sanctions against Iran were included in the foreign aid bill passed by the US House on the weekend. It will extend measures to include ships and refineries that process and transport Iranian crude. It will also cover all financial transactions for the purchase of oil products between China’s financial institutions and Iranian banks facing sanctions.
• EU foreign ministers will discuss additional sanctions on Iran at their meeting today.
  • Brent JUN 24-JUL 24 down 0.02$/bbl at 0.76$/bbl
  • Brent JUN 24-DEC 24 down 0.2$/bbl at 4.16$/bbl
• Crude time spreads are softer today but still holding onto strong backwardation while money managers are the most bullish on Brent since March 2021. Near term crude options are maintaining a small call skew although much reduced from the bullish skew seen last week.
• Diesel crack spreads and time spreads continue to decline with soft near term US demand weighing on prices. The prompt Gasoil spread last week fell into contango for the first time since May 2023.
  • US gasoline crack up 0.1$/bbl at 30.65$/bbl
  • US ULSD crack down 0.3$/bbl at 23.4$/bbl