Brent crude is trading slightly higher this morning, extending yesterday’s rally as the geopolitical risk premium was repriced higher on renewed U.S.-Iran tensions.
That’s what Ole R. Hvalbye, a commodities analyst at Skandinaviska Enskilda Banken AB (SEB) stated in a report sent to Rigzone by the SEB team on Thursday morning, noting that Brent “is now up $4.5 per barrel from Tuesday’s low, and around $3.7 per barrel since Monday morning, currently trading near $71.3 per barrel”.
“For reference, that is still roughly $0.5 per barrel below the late-January peak, suggesting there is room for further upside should U.S.-Iran rhetoric escalate further. WTI is trading around $66.1 per barrel,” he added.
In the report, Hvalbye highlighted that American Petroleum Institute (API) data last night showed a 0.6 million barrel draw in crude inventories, “versus Bloomberg consensus of a 0.7 million barrel build”. He pointed out that the “more detailed” U.S. Energy Information Administration (EIA) data is due later today.Hvalbye also noted that, in derivatives, the options market continues to price upside risk.
“The Brent second-month 25-delta call skew has widened to around +17 percent, the highest since early February, indicating stronger demand for upside protection: a clear signal that the market is more concerned about a price spike than a sharp decline,” he said.
Hvalbye went on to state in the report that, despite talk of a global surplus, oil prices have remained resilient this year.
A key reason is that much of the excess supply is tied up in sanctioned crude, either drifting at sea or constrained by logistics, limiting its effective availability to the broader market,” he noted.
In a report sent to Rigzone by the Standard Chartered team earlier this week, Standard Chartered Bank Energy Research Head Emily Ashford outlined that “sentiment was neither hugely bullish nor bearish” at the recently wrapped up International Energy Week event in London. Ashford said “most agree[d]…” with the company’s view that “prices in the low to mid $60s per barrel represent fair value at present”