Key Points

- Oil futures see an increase in early Asian trading following a sharp drop
- Crude oil remains under bearish pressure after breaking below the 200-day moving average
- Oil prices fall as traders weigh Middle East return and supply glut risks
- Oil supply expected to return slower than anticipated
- Strong US production and refinery demand stabilize oil markets

Oil futures witnessed a rise in early Asian trading as hopes for a technical recovery emerged following the sharpest quarterly drop since 2020. The crude oil market has been under bearish pressure after breaking below the 200-day moving average, although it is currently testing a key multi-layer support zone where a potential base could be established.

Concerns over oil supply were raised as shipping traffic through the Strait of Hormuz increased, driven by expectations of a permanent US-Iran deal. Additionally, a Wall Street bank issued warnings about a potential supply glut. Michelle Brouhard, Head of Policy and Geopolitical Risk at Kpler, joined the discussion on these developments.

The ongoing negotiations between the US and Iran have led to a pullback in oil markets, setting the stage for the largest quarterly price drop in six years. However, workarounds for the Strait of Hormuz chokepoint and a decline in crude imports to China have helped mitigate the impact of lost Persian Gulf oil.

Despite the support seen on Tuesday, Rebecca Babin, Senior Equity Trader at CIBC Private Wealth, believes that the market is overestimating the speed at which oil supply will return to pre-conflict levels. Analysts at Morgan Stanley also noted a faster-than-expected reopening of the Strait of Hormuz, leading them to cut their oil-price view for the near future.

Sunda Energy PLC reassured investors of its stable financial position, stating that it would not draw further convertible debt for its planned acquisition in New Zealand. The company credited the recent increase in oil prices and improved cash flows from Matahio NZ for easing its funding needs.

Oil markets experienced stabilization due to strong US production and refinery demand. WTI oil defended key support levels at $70.09, while Brent oil remained steady at $73.37. Natural Gas traded within an ascending channel at $3.167.

The retreat in energy prices has relieved pressure on European Central Bank policymakers to raise interest rates next month. However, there is still a possibility of a small hike in the future. Oil prices continue to face pressure as US-Iran talks reduce the war premium, while uncertainties surrounding the Strait of Hormuz and key support levels for WTI and Brent shape the next move.

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Up/Down Rally

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Earning Price Impact Analysis

Seasonality