US-Iran peace deal hopes dim, oil prices up
Oil prices held near more than one-week highs on Tuesday as hopes for a deal between the United States and Iran to end their war and reopen the Strait of Hormuz weakened, Reuters said.
Brent crude futures fell 10 cents, or 0.11%, to $87.62 a barrel by 0405 GMT, while U.S. West Texas Intermediate (WTI) crude futures slipped 5 cents, or 0.06%, to $82.08 a barrel.
Both benchmarks surged more than 5% on Monday, reaching their highest levels since July 31, after U.S. President Donald Trump responded to Iran’s conditions for a peace agreement with demands that Tehran compensate people killed in wars, attacks and protests.
Trump’s demands are expected to further complicate diplomatic efforts to reopen the strategically important Strait of Hormuz, through which a significant portion of the world’s oil supply passes.
Trump later said the United States had taken control of the strait and had swept the strategic waterway for Iranian mines.
“There appears to be a gulf, no pun intended, between the U.S. and Iran over what any agreement would actually look like,” said Tim Waterer, chief market analyst at KCM Trade.
He added that the uncertainty was reversing some of the optimism seen last week and was supporting oil prices.
Supply Risks Remain
Supply concerns were also heightened after Saudi Aramco postponed the restart of its 400,000-barrel-per-day Jazan refinery to August 30. The delay followed claims by Yemen’s Houthi group that it had carried out two attacks on the facility on Sunday.
Waterer said risks around both the Strait of Hormuz and the Bab el-Mandeb remained significant, with even intermittent disruptions or the threat of further attacks keeping insurance costs high and forcing ships to take longer routes.
“As a result, energy flows look likely to stay constrained near term,” he said.
According to Barclays analysts, crude oil and refined-product net exports through the Strait of Hormuz averaged around 3 million barrels per day in the week ending August 7, down sharply from 4.4 million bpd in the previous week.
Despite the disruptions, some oil continues to move through the blockades via ship-to-ship transfers and overland routes.
IG analyst Tony Sycamore said markets could remain in a state of “morbid detachment” if oil continues to flow through alternative routes despite the restrictions.
Meanwhile, Abu Dhabi National Oil Company (ADNOC) has launched another tender to sell spot crude, its eighth since the beginning of June, as the UAE state-owned oil producer seeks to move crude from inside the Strait of Hormuz.
The continued geopolitical uncertainty, coupled with disruptions around key shipping routes, is expected to keep oil markets highly sensitive to developments involving the U.S., Iran and the region’s major energy infrastructure.
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