Oil: Prices guided by the politics - TDS

According to analysts at TD Securities, the situation in Iranian continues to muddy with the idea of a UK-Europe led maritime protection force in the Persian Gulf getting traction, while the appointment of Boris Johnson as the UK Prime Minister could see the UK begin to align more hawkishly alongside President Trump on Iran.

Key Quotes

“On the other hand, the JCPOA meeting scheduled for this Sunday could ease tensions somewhat. Despite this precarious geopolitical situation, stories of ample supply to offset an extended closure of the Strait of Hormuz, along with stories of "hidden" Iranian barrels in China continue to weigh on curve structure, as prompt Brent spreads shift from around $0.60/bbl backwardation just a week ago, to flirting with contango this morning.”

“Aside from the geopolitics, yesterday's API inventory numbers showed a nearly 11m barrel decline in US inventories, which if confirmed by the DOE data this morning, would offer further support as inventories appear to continue heavily drawing through the summer.”

“On the products side, CTAs have begun covering heating oil shorts, but prices remain anchored to key trigger levels. A smaller-than-expected inventory build today could see momentum firm and induce further short covering.”