Brent Prices Plummet Below $90/bbl Amid Gulf Diplomacy Progress

Oil prices are under renewed downward pressure as diplomatic talks between Iran, Oman, and Pakistan on the Strait of Hormuz make progress. According to ING analysts Warren Patterson and Ewa Manthey, these positive signals from Persian Gulf talks have caused Brent oil prices to slide below $90/bbl.

The catalyst for this decline is not a return to normalcy in oil flows through the key chokepoint, but rather the ongoing risks associated with Hormuz. 'Any agreement between these two parties does not mean we will see normalization in oil flows through the key chokepoint,' they note. 'We would likely need to see the US lift its blockade on Iranian ports and ease sanctions on Iran before we see any move towards normalisation.'

The analysts question the accuracy of US flow estimates, citing ship-tracking estimates that are significantly lower than claimed. They point out that while an average of 8-9m b/d of oil is flowing through the Strait of Hormuz may be achievable over short time periods, this number seems aggressive over a longer time frame.

Meanwhile, US crude oil inventories rose by 4.2m barrels last week, but the products market tightened further, with gasoline and distillate inventories falling by 3.2m barrels and 500k barrels respectively.