Oil prices are holding firm as critically low inventory levels, particularly in the United States, continue providing underlying support despite geopolitical developments that could ease supply concerns. DBS Group Research strategist Eugene Leow cautions that even if a potential US-Iran agreement reopens the Strait of Hormuz and restores shipping flows through the crucial waterway, tight stockpiles may prevent any significant price decline. This inventory constraint is also expected to maintain upward pressure on global bond yields as energy costs remain elevated.
The warning comes as traders evaluate competing forces in oil markets between possible supply relief from Iranian crude exports and persistent inventory drawdowns across major consuming nations. The United States has seen particularly acute stockpile reductions, creating a supply cushion that appears insufficient to absorb potential demand shocks or production disruptions.
FXnCO Insight
Traders should maintain long positions in oil and factor sustained elevated energy costs into fixed income strategies, as structural inventory shortages will likely override any temporary diplomatic supply boosts.
Source: FXStreet