WTI crude is down a little over 2% today to just below $97 now, effectively closing the Monday gap higher. This comes after some positive headlines yesterday, with reports of a second round of talks later this week. For the most part, markets seem to be taking their cue from what US president Trump has to say.
Trump is now saying that the US is in touch with “the right people” from Iran and believes that they will agree on de-nuclearisation. He also seems eager to move on already as he mentions that “we may stop by Cuba after we’re finished with this”.
All that being said, is still all too optimistic a take?
The issue with how markets are responding still for now is that it doesn’t so much so tie back to the reality of the situation.
There is still no movement along the Strait of Hormuz and nobody in the region can get their oil and gas out. So long as that remains the case, the physical market will continue to reflect skyrocketing prices and eventually something has got to give. The North Sea premium is still sitting between $30 to $50 per barrel at the moment.
Traders are hopeful and are continuing to bet on the situation improving in the next week and in the coming month(s). But when it is time to pay the piper, something’s gotta give. That is reflected in the optimistic risk rebound we’re seeing in the past day, despite the headlines needing to catch up.
But come what may, it’s all a question of what happens next with the Strait of Hormuz. As much as Iran might agree to any terms to de-escalate the conflict, it is hard to imagine them giving up control over the waters
