Brent crude had a strong week, climbing around 6%, as geopolitical tensions with Iran flared up again. Prices have rebounded from levels not seen since before the conflict escalated, with tanker traffic through the Strait of Hormuz grinding to a near halt once more. Prior to this, the mentioned waterway used to handle about a fifth of the world’s oil and gas shipments.
On the supply side, there are also some headwinds. OPEC is set to boost production by 188,000 barrels per day from August, and Saudi Arabia has lowered its prices for Asia. US crude stockpiles came in a bit better than expected, but gasoline and distillate inventories are shrinking. Meanwhile, the refined products market remains tight due to processing constraints and diesel export disruptions. This shows that higher crude reserves do not necessarily spell weaker fuel demand—at least not yet.
Over the coming month, the geopolitical factor is likely to outweigh rising supplies. The risk premium for Brent prices will persist, even with limited restrictions on shipping through the Strait of Hormuz. This is especially true given depleted strategic inventories and the eventual need to replenish them.
The ultimate recommendation is to buy Brent crude at the current price, targeting $80 per barrel within a week. To mitigate the risk of adverse market movements, place a Stop Loss order slightly below the support level, at $75.
This content is for informational purposes only and is not intended to be investing advice.
