Oil: Gulf tensions underpin risk premium – ING

ICE Brent is back above $110/bbl. ING analysts Warren Patterson and Ewa Manthey say Oil prices remain well supported following fresh attacks on Saudi Arabia. Kuwait continues to export as much crude as it did before the war, with production exceeding 2m b/d, they note. However, difficulties shipping refined products and elevated US inventory drawdowns continue to underpin a sizeable risk premium.

$110/bbl: Brent supported by supply risks

"Despite the volatile environment, oil flows from the Persian Gulf are holding up. According to the CEO of Kuwait Petroleum Corp, Kuwait is exporting as much crude oil as before the war and producing more than 2m b/d. However, he admitted that the shipping of refined products is more of an issue."

"While oil flows have remained elevated, President Trump has expressed concern that oil prices remain elevated due to supply risks. This leaves plenty of uncertainty over the sustainability of flows. The sizeable risk premium currently embedded in prices is unlikely to fade until clear signs of de-escalation emerge and reassure investors that regional supply will remain uninterrupted."

"EIA inventory data shows US crude oil inventories fell by 3.06m barrels over the last week. There was anadditional 300k-barrel fall in Strategic Petroleum Reserves. The data still reflects the impact of hurricane activity in the US Gulf of Mexico, with US oil production estimated to have fallen 410k b/d week-on-week."

"Oil prices remain well bid, with ICE Brent back above $110/bbl this morning following additional deadly attacks on Saudi Arabia. Drones struck the Shaybah oilfield and Dammam's international airport. An oil processing plant was the target of the attack."

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