Early Morning Kommentar

 -  Asia midday crude futures: Ice Brent rebounds

22 July (Argus) — Ice Brent crude futures returned from five-week lows during early Asian trading today after Israel and Yemen-based Houthi militants exchanged attacks over the weekend.

At 04:00 GMT the Ice front-month September Brent contract was at $83.18/bl, higher by 55¢/bl from its settlement on 19 July when the contract ended $2.48/bl lower.

The Nymex front-month August crude contract was at $80.61/bl, higher by 48¢/bl from its settlement on 19 July when the contract ended $2.69/bl lower.

Israel's military struck Yemeni city Hodeidah, a Houthi-controlled port along the Red Sea, in retaliation for the militant groups' drone attack on Tel Aviv, further stoking heightened geopolitical tensions in a key shipping lane for the global economy. Israel's airstrikes targeted "the power station that supplies the coastal city of Hodeidah" and also "the Hodeidah port and fuel tanks," Houthi spokesperson Yahya Saree said. Saree vowed an "inevitable" and "huge" retaliation to Israel's assault. Saree also claimed on 21 July that the group fired ballistic missiles targeting Eilat in southern Israel. Israel's Defence Forces said it intercepted a "surface-to-surface missile that approached Israeli territory from Yemen."

US President Joe Biden has dropped his bid for a second term and is endorsing vice-president Kamala Harris to serve as his party's presidential nominee, bowing to pressure from top Democrats who no longer saw a viable path for him to defeat former president Donald Trump in the November election. Biden has committed to serve out the remainder of his term, which ends on 20 January 2025.

Biden's administration has renewed a waiver from US sanctions targeting Iran to allow Iraq to import electricity and natural gas from its neighbour. The US has been issuing such waivers since Trump's administration imposed sanctions against Iran in 2018. The US action this week was the 22nd renewal of the authorisation. The latest waiver is valid until mid-November. Iraq relies on Iran for about 25pc of its energy needs, down from 40pc three years ago, according to the US State Department. The US sees Iraq becoming self-reliant on energy by 2030.

A Trump victory in the November election could once again lead to tensions between Washington and Baghdad when the waiver comes up for renewal after January 2025. The Trump administration set the length of the waiver arbitrarily to use the issue as political leverage over Baghdad. Despite issuing such waivers in 2018-20, many former Trump officials have taken to describing the Biden administration's actions as a financial giveaway to Tehran.