With tankers detained and drones shot down the geopolitical mess surrounding Iran does not look to be ending anytime soon. Iran’s seizure of a UK-owned chemical tanker and the brief detainment of a crude-laden VLCC, coupled with the sudden shutdown of the Sharara field in Libya, sent crude prices upwards early this week. Risks of a more serious conflict rose even higher when the US Central Command reported that a second Iranian drone had been shot down over the Strait of Hormuz and sanctioned the Chinese state-owned oil company Zhuhai Zhenrong for buying Iranian crude. The resumption of US-China trade talks offered some relief for markets, but bearish sentiment was cooled by a substantial US crude inventory drawdown.
As of Wednesday afternoon, global crude benchmark Brent traded within the $63.9-64.2 per barrel interval, whilst US benchmark WTI was assessed around $56.9-57.1 per barrel.
1. Influx of US Crude Puts Pressure on WAF Grades
- West African crude trading has been under tangible pressure from US crude movements which supplant them from traditional hubs of demand.
- Whilst WAF grades generally trade for 2 months in advance, traders are still seeking to clear August-loading cargoes, both Angolan and Nigerian.
- For the moment the supply overhang is not yet reflected in the market’s assessment of the crudes (even though the August OSP are already out) as the Nigerian crudes’ tender season still did not close.