Deutsche Bank analysts describe a sharp reversal in Brent Oil as optimism over Iran-related supply risks grows. They highlight an -11% one-day drop in Brent, further weakness overnight, and swings driven by Saudi Aramco pipeline news, US political statements, and potential IEA reserve releases. Despite the correction, Brent remains about 20% above pre-strike levels.

Conflict-driven swings reshape oil pricing

"Until we move onto the next big event, markets continue to be driven by volatile news flow around Iran and the outlook for oil flows. Overall, the narrative has shifted towards a cautiously more optimistic tone, even as there’s little sign of an imminent end to the conflict. The improved optimism helped drive a dramatic fall in oil prices, with Brent crude down -11.28% from Monday’s European close to $87.80/bbl, marking its largest one-day decline since March 2022."

"The 12-month Brent future also fell by -1.93% to $72.05/bbl. After some volatility late yesterday, Brent is slightly lower again this morning and is around -27% below Monday’s intra-day highs but still about +20% above where it was before the US and Israeli strikes against Iran."

"While much of the oil decline had come after Trump comments late on Monday, the move extended on Tuesday, notably after Saudi Aramco said it will ramp up crude flows via its pipeline to the Red Sea to 7mb/day within a few days, which would allow it to resume 70% of its usual oil shipments."

"And while reporting over potential mining of the Strait of Hormuz saw oil prices bounce late in the US session, they moved lower again overnight after the Wall Street Journal reported that the IEA (International Energy Agency) has proposed the largest release of oil reserves in history to combat rising prices."

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