Sharp Correction in Brent Oil: Geopolitical Risks Retreat as Supply Pressure Mounts

Brent crude oil, which had been sustaining its rally under the shadow of geopolitical tensions, initiated a sharp correction upon signals of diplomatic solutions, retreating to the $84.86 level in international markets.

Erosion in Geopolitical Risk Premium

Escalating tensions along the Bab el-Mandeb Strait and the Red Sea are rapidly normalizing with the Riyadh administration's coalition initiatives and the Houthis denying claims regarding "transit fees".

■The Houthis denied allegations that extra fees would be collected from commercial ships passing through the strategic strait, alleviating fears of supply cuts.

■Saudi Arabia hosted the Maritime Defense Coalition meeting, taking military and diplomatic steps to ensure regional security.

■Expectations of a ceasefire and nuclear deal in diplomatic negotiations between the US and Iran significantly weakened the geopolitical risk premium.

Supply Side Pressure Intensifies

Revisions in OPEC+ group production policies and expectations of increased global supply constitute the core dynamics of the downward pressure on price action.

■OPEC+ decided to increase the daily production quota by 188,000 barrels starting from August, signaling an excess supply.

■This decision marks the fifth phase of the process of reversing voluntary production cuts implemented in 2023.

■Increased tanker traffic in the Strait of Hormuz and expectations of easing sanctions are strengthening global supply security.

Markets broke below the critical resistance of $86.16 with the selling wave starting from the $89.50 level. I predict that while Brent is currently struggling to hold above the $84.50 support zone, a dip below this level could indicate deeper Fibonacci correction levels; however, the $84.00 level, which aligns with the main band of the Ichimoku cloud, is likely to form a strong base.