ING Warns Brent Rally Risks Persist Despite Ceasefire

Key Moments

Ceasefire Prospects Pressure Brent, But Upside Risks Remain

ING analysts Warren Patterson and Ewa Manthey report that Brent crude has slipped under $90/bbl as markets react to renewed expectations of a ceasefire and a potential restart of energy shipments through the Strait of Hormuz. They argue, however, that any agreement could prove unstable, and warn that if flows are not restored by late July, tightening inventories combined with stronger seasonal demand could lift Brent prices towards $120-130/bbl.

Market Dynamics and Price Action

“The price action in oil markets is no surprise, with Brent falling below $90/bbl on the latest developments. The relatively benign price action in recent weeks masks the scale of the supply disruptions from the Persian Gulf. However, in the absence of a deal, this is unlikely to last.”

“We believe the market reaches an inflection point in late July if we do not see oil flows resuming before then. This is when inventory levels and seasonally stronger demand push prices significantly higher towards $120-130/bbl.”

Demand Outlook and OPEC’s View

“OPEC remains fairly constructive on global oil demand, expecting it to grow just shy of 1m b/d YoY in 2026. This is down from a previous forecast of 1.17m b/d year-on-year, though. Most other agencies forecast a contraction in demand this year amid supply disruptions in the Middle East.”

“Therefore, we would be cautious about assuming that the extension of the ceasefire is a done deal. Even if it is, it could be fragile. And clearly, if nuclear talks do not progress, it could very easily fall apart.”

Offsetting Supply from Persian Gulf Producers

The analysts note that a significant decline in supply has been partially counterbalanced by evidence of increased production from other Persian Gulf exporters, consistent with recent indications that more crude is transiting the Strait of Hormuz.

“This large decline was offset by signs of supply increases from other Persian Gulf producers, which ties in with recent reports that more oil is flowing through the Strait of Hormuz. Saudi output increased 157k b/d MoM, while the UAE and Iraq increased output by 87k b/d and 75k b/d MoM, respectively.”