Oil Lower on Monday

Oil prices are pushing lower on Monday on the back of news that President Trump has waived some sanctions against Russia after agreeing a diesel export deal with Moscow. Trump explained that the move is aimed at bolstering chances of peace between Russia and Ukraine, incentivising Russia to move to the negotiating table in a sincere way. Futures prices have fallen around 2% so far through early European trading, reversing the gains seen on Friday.

Oil Flows Rebounding Firmly

Additionally, comments from US Energy Secretary Chris Wright have also added to bearish sentiment after he signalled that Persian Gulf flows had returned to around 80% of their pre-war levels. This echoes the recent news we had that flows from the Middle East as a whole have now returned to pre-war levels. A big driver behind this recovery was the return of the East-West oil pipe in Saudi Arabia which has been brought back online despite ongoing fighting between Riyadh and Houthi rebels aligned to Iran.

Risks Remain

Despite the turn lower today, the backdrop remains volatile and news of three tankers sustaining damage in the Strait of Hormuz over the weekend serves as a reminder that the shipping channel is still very much contested. While that remains the case, upside spikes on incoming headlines remain a key risk to crude prices.

Technical Views

Crude

The rally has seen the market breaking firmly back above the 95.06 level, supported by the bull channel lows. While atop that level and with momentum studies bullish, focus is on a continuation higher towards the 104.26 level next. If we see any downside break of the channel, focus will shift to 84.60 next.