FX.co ★ Oil Erases Early Losses

Brent crude oil futures climbed above $68 per barrel on Monday as markets continued to reassess the appropriate risk premium. US President Trump expressed cautious optimism over negotiations with Iran on a potential agreement to curb Tehran’s uranium enrichment capabilities. Oil prices had surged in previous weeks amid escalating tensions between the two countries, which led markets to factor in a higher likelihood of tougher US sanctions on Iranian oil and the risk of Iranian authorities intercepting tankers passing through the Strait of Hormuz. This increase in risk premia temporarily overshadowed the prevailing view that the oil market would remain oversupplied this year, given cumulative output increases from OPEC members and robust production from the US, Canada, and Brazil outside the cartel. In addition, India’s oil import outlook remained uncertain, as its trade agreement with the US was conditioned on halting purchases from Russia—a requirement that Russia has resisted by pushing back against major revisions to contracts with Indian refiners.