ING analysts Warren Patterson and Ewa Manthey note that Oil prices are grinding lower as flows from the Persian Gulf gradually recover, with ICE Brent down over 1%. They argue the sell-off looks overdone given a still-tightening market and limited recovery in Strait of Hormuz volumes. US inventory data show modest crude draws and product builds, while Russia’s potential diesel export ban supports middle distillates.

Brent pressured as Gulf flows rebuild

"Oil prices continue to grind lower, with ICE Brent settling a little over 1% lower yesterday. Positive signals from the Persian Gulf are fuelling optimism about oil flows through the Strait of Hormuz. Vessel crossings increased in recent days, although they remain well below pre-war levels."

"Estimates suggest that roughly 6-7m b/d of oil moved through the strait in recent days, which is still far below pre-war flows of around 20m b/d. However, with pipeline diversions for Saudi Arabia and the UAE, we only need to see oil flows through the strait return to around 14m b/d for oil supply from the Persian Gulf to return to pre-war levels."

"We continue to believe that the oil sell-off is overdone, with the market still tightening. Clearly, price movements suggest the market expects a fairly rapid recovery in Persian Gulf oil supplies."

"The latest numbers from the American Petroleum Institute (API) show that US crude oil inventories fell by just 800k barrels over the last week. Crude stocks at the WTI delivery hub, Cushing, fell by 1m barrels."

"Refined product supply concerns in Russia continue to grow amid ongoing Ukrainian attacks on Russian energy infrastructure. Russia has already imposed export restrictions on gasoline and jet fuel, but there are reports that the government is considering a ban on diesel exports."

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