ING sees geopolitical risk premium persisting despite Gulf flows
December Brent crude futures rose 0.3% to $109.90 a barrel on Tuesday, while December West Texas Intermediate futures gained 0.2% to $98.75 a barrel. The increases followed Monday’s declines, when Brent settled slightly lower as investors assessed President Trump’s decision to waive newly imposed sanctions on Russia.
The moves came as traders weighed persistent Middle East supply risks against signs of recovering Gulf crude exports and prospects for additional Russian energy reaching global markets. Recent shipping attacks — an attack on a tugboat near the United Arab Emirates on Sunday and attacks on two tankers off Saudi Arabia on Friday, according to U.K. Maritime Trade Operations — have added to supply concerns.
Analysts at ING said Tuesday that oil prices remain supported by a significant geopolitical risk premium despite relatively strong crude flows from the Persian Gulf. The premium could gradually ease if shipments continue without further disruptions, ING said, but the bank added there are no signs of that happening yet.
Record tanker freight rates are also adding to transportation costs, according to ING. Allowing sanctioned tankers into the regular shipping market could help lower freight rates, the bank said, although the amount of additional capacity and how quickly it could be made available remain uncertain.
The Wall Street Journal reported separately that Iran has been providing Yemen’s Houthi militia with intelligence and targeting assistance for attacks on Saudi Arabia. Shipping disruptions have continued in recent days, with U.K. Maritime Trade Operations reporting an attack on a tugboat near the United Arab Emirates on Sunday, following attacks on two tankers off Saudi Arabia on Friday.
Analysts at ANZ Research said efforts to support oil flows through the Strait of Hormuz may fall short of stabilizing fuel markets as supply risks in the Middle East continue to increase.