Gulf Exports Rebounding

Oil prices remain muted ahead of the weekend as the futures market continues to consolidate in the low $80s. The market is down from last weeks highs around the $88 mark. Part of this is due to the reported rebound in supply from the Persian Gulf. In a note, Goldman Sachs said its measurements show supply from the region as recovered to around two-thirds of the pre-war output level. Crude exports from the region are around 15/16 million barrels per day currently, down from the pre-war average of 22 million barrels per day but well off the lows of around 5 million barrels per day seen in March.

Strait of Hormuz

There is also some optimism around the prospect of the Strait of Hormuz reopening. Iran and Oman have been in discussions recently aimed at establishing joint management of the key shipping channel and have reportedly agreed a revenue sharing framework though have signalled that the Strait will not reopen immediately. The question now is whether the US will allow such a framework to exist having previously warned that it wouldn’t allow the two countries to charge tariffs for use of the waterway. As such, there is still a lack of clarity for traders which should keep the current consolidation in play until we get a clear signal on when/how the Strait will reopen.

Technical Views

Crude

For now, crude prices remain anchored around the 77.65 – 84.60 region. Momentum studies have flattened out recently, reflecting the loss of direction in the market. While above the broken bear trend line from YTD highs, focus is on an eventual push higher with 95.06 the next target for bulls. If we do turn lower again, 70.76 is the deeper support level to watch.