Brent crude rebounds above $92 as strikes temper Iran diplomacy hopes

Physical Brent discount to futures reaches $2.12 as cargoes lack buyers

Oil prices rose Wednesday, with Brent crude recovering above $92 a barrel after a sharp selloff, as renewed strikes in the Middle East tempered expectations of a diplomatic resolution to the U.S.-Iran conflict. Front-month Brent crude, the global oil benchmark, rose 1.2% to $92.55 a barrel, while West Texas Intermediate futures gained 0.7% to $86.67 a barrel.

The rebound followed several sessions of steep declines. Those declines came after President Trump signaled that further U.S. military action against Iran was unlikely for now, which raised hopes that negotiations could bring the conflict to an end.

In recent days, the United States repeatedly struck Iran’s Qeshm Island, which houses Revolutionary Guard missile and drone facilities. Tehran said on Tuesday that it had targeted an Omani island used to help ships navigate the Strait of Hormuz.

U.S. and Gulf officials described the American strikes as defensive operations aimed at protecting commercial shipping rather than preparations for a broader military offensive.

Scott Shelton of TP ICAP said the recent selloff might have less room to run if negotiations made no further progress. He said speculative long positions held by commodity trading advisers had largely been unwound, potentially reducing the selling pressure that weighed on oil futures in recent sessions.

MUFG said the recent decline in oil prices could prove difficult to sustain without a lasting diplomatic settlement and greater confidence among shipping companies that vessels can safely transit the Strait of Hormuz. The bank noted that an earlier agreement to reopen the strait lasted only a few weeks before attacks resumed.

S&P Global Commodity Insights said physical oil markets were showing signs of excess supply in some regions. The company said physical Brent crude had fallen to its weakest level against futures in about five months, as elevated freight costs and cheaper Middle Eastern barrels limited demand for North Sea crude in Asia.

The physical Brent discount to futures reached $2.12 a barrel Monday, according to S&P Global. Several North Sea cargoes remained without buyers, the company said.

The market signals were divided. Shelton emphasized further progress in negotiations, while MUFG emphasized both a lasting diplomatic settlement and shipping-company confidence in safe transit. Futures rose on renewed supply concerns, but physical Brent showed signs of excess supply in some regions.