Brent firmer above $ 65 on USD weakness, US-Iran rift - Danske Bank

The Danske Bank analysts mainly attribute the latest strength in Brent oil to broad-based US dollar weakness induced by the dovish Fed. But the escalating US-Iran geopolitical tensions also continue to underpin.

Key Quotes:

“The US is planning more sanctions against Iran in order to force the country back to the negotiating table and agree on a deal to ensure Iran never requires nuclear weapons.

US Secretary of State Michael Pompeo will visit Saudi Arabia and the UAE to discuss a global coalition against Iran. Iran has already seen a sharp drop in oil production following the first round of US sanctions, which has tightened world oil supply.

New sanctions are therefore likely to be felt primarily in Iran and to a lesser extent in the rest of the world. Brent is trading above USD65/bbl.

However, we reckon this is more a function of the recent recovery in risk sentiment and weakening of the USD with the outlook for upcoming rate cuts in the US.”