Commodities
Home›Commodities›Energy›Brent slides as Middle East ceasefire hopes revive sup…
Brent slides as Middle East ceasefire hopes revive supply outlook
CME derivatives now price a 38% July odds for monetary tightening, the highest uncertainty since September 2024, as the oil and dollar correlation weakens.
Brent crude fell sharply, with the oil and US dollar losing their prior correlation as investors reacted to reports of a ceasefire in the Middle East and increased optimism around US progress in negotiations with Iran, Action Forex reports.
The move comes amid fears the Federal Reserve could still take a surprise policy step. CME derivatives put the odds of July monetary tightening at 38%, the highest uncertainty since September 2024, which could strengthen the dollar if markets are caught off guard.
On the supply side, expectations for easing conflict are driving the shift. Macquarie Bank expects the oil market could swing to a surplus of 2 million barrels per day as early as the fourth quarter, rising to about double in the first quarter of 2027, even as traffic through the Strait of Hormuz stays subdued while tankers continue to pass through the Red Sea.
While some risks remain, analysts cited in the report argue the imbalance may be less severe than in recent months. Kpler estimated about 25 tankers passed through the Bab el-Mandeb Strait, and the Caspian Pipeline Consortium resuming operations in the Black Sea reduced disruption fears, though Barclays estimated Strait of Hormuz flows have dropped from 5.9 million bpd to 2.9 million bpd and Société Générale put around 4% of global supplies at risk. The report also notes that each month of Middle East conflict could add $10 per barrel to Brent, and that Chinese imports may rebound from 6.2 million bpd in June to 7.8 million bpd in July.
Latest closeWTI crude $81.92 ▼8.3%|Brent $87.83 ▼9.2%