West Texas Intermediate and Brent futures fell more than 2% in early trading after last week's gains. An analyst at XS.com ties the pullback to technical factors and mild hopes for Middle East talks, but sees the possibility of renewed escalation and likely further gains for crude.
West Texas Intermediate and Brent crude futures are falling more than 2% in early trading this week, after gains last week. Brent also posted its highest daily close since 2022.
Samer Hasn, Senior Market Analyst at XS.com, writes that the fading gains appear driven by technical factors following the recent price extension. He adds that mild optimism about resuming negotiations may help fuel a corrective trend.
Talks draw scepticism
Reuters reported that senior officials from Saudi Arabia, Turkey, and Pakistan will meet Iranian officials today, the first high-level contact between Iran and those countries since the Kingdom plunged deeper into the regional war last July. However, Hasn believes it is far too early for optimism. He sees a higher likelihood of failure in establishing a broad and sustainable calm.
At best, he argues, the talks could bring de-escalation on the Yemen front and an attempt to restore the situation to what it was before the July escalation. That outcome could provide a vital source of relief for the market, but he does not expect it to be substantial for the wider settlement between Iran, the United States, and Israel.
Infrastructure attacks keep the risk premium high
Meanwhile, the Houthis stated that they attacked a pumping station on the East West pipeline in the Kingdom, though details and confirmation are lacking. Hasn says the persistent intent to target production and export facilities is bound to keep crude price peaks high. In his view, relatively high export levels alongside elevated price peaks reflect the size of the risk premium and fears of supply loss.
Israel's parliamentary elections, which launch tomorrow, are another focal point for Hasn. He notes reports that Prime Minister Benjamin Netanyahu fears losing his coalition, and he argues that this uncertainty could make him more inclined to escalate against Iran.
Without sustainable prospects for de-escalation, next November is likely to bring another month of gains for crude prices, Hasn concludes.
Source: Investing.com
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