Brent: Price weakness linked to US-Iran talks – MUFG

Brent has fallen about 16% and continues to weaken. MUFG’s Lee Hardman highlights the sharp downward repricing across energy markets. Oil prices are being pushed lower by renewed investor optimism about a potential US-Iran deal and stepped-up diplomacy across the Middle East. Sustaining lower energy prices and containing upward pressure on the US Dollar will require further progress in talks, MUFG cautions.

16% Brent decline tied to diplomatic efforts

"The other main development last week was the sharp adjustment lower for energy prices. The price of Brent fell by around 16% and has continued to weaken further at the start of this week. Lower energy prices have been encouraged by renewed investor optimism over the potential for a US-Iran deal."

"Investor optimism has been encouraged further over the weekend by comments from President Trump who told CNN that it is “highly unlikely” he will need to order fresh military strikes on Iran if talks show progress. He noted that “it depends on whether or not they sign a very strong agreement."

"However, US Secretary of State Macro Rubio sounded more cautious saying that “I wouldn’t say we’re on the verge of a breakthrough”. Further progress in talks will be required to sustain lower energy prices and help to ease upward pressure on the US dollar from a more protected energy price shock."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)