ING strategists Warren Patterson and Ewa Manthey note that Oil rebounded after a vessel was struck in the Persian Gulf, but they stress that price momentum remains to the downside as flows through the Strait of Hormuz recover. They highlight fragile regional security, potential slowing of vessel traffic, and ongoing risks to future supply dynamics.

Hormuz risks and OPEC tensions

“The sell-off in the oil market came to an abrupt halt yesterday after reports of a commercial vessel being struck in the Strait of Hormuz. It highlighted the fragile state of the ceasefire, while also demonstrating the risks facing vessels in the Persian Gulf. This latest development saw ICE Brent reverse its earlier-day losses, settling more than 2% higher.”

“However, despite this move, market momentum still appears to be largely downward. The market is largely focused on the resumption of oil flows through the Strait of Hormuz, which continues to increase. However, much of the increase reflects previously stranded vessels leaving the Persian Gulf.”

“It suggests that once stranded vessels have moved out, we could see a pullback in flows. Also, the latest strike on a vessel will likely slow traffic, with the International Maritime Organisation suspending its evacuation plan for stranded ships.”

“OPEC is facing additional challenges following the UAE’s recent exit. Iraq’s oil ministry is now pressuring the group for a higher production quota, threatening to rethink its membership if it doesn’t receive a larger one. Iraq is the second-largest producer within the group.”

“Comments from the oil ministry appear more like a threat. Clearly, if things become more serious, it will only add to the surplus narrative for 2027. Iraq has a production capacity of almost 4.7m b/d”

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