Oil climbed in a choppy Thursday session as traders doubted a potential Iran-Oman deal would quickly restore normal shipping through the Strait of Hormuz. Brent settled above $82 a barrel and WTI rose to $77.29, even as fresh security incidents around the Gulf kept the market on edge.
Oil rose in a choppy session on Thursday as signs mounted that a potential Iran-Oman deal wouldn't lead to a full-fledged resumption of shipments through the Strait of Hormuz, tempering optimism that had built in previous days. Brent climbed 3.8% to settle above $82 a barrel, after swinging between small gains and losses. WTI for September delivery was 2.8% higher, settling at $77.29 a barrel in New York.
Iran signals new restrictions on shipping
The market surged to intraday highs after Iranian media reports that Tehran will seek to bar US and Israeli ships from the waterway and require compensation from hostile countries before they're allowed to use it. Traders interpreted the report to mean Gulf state exports will remain restricted in the near term for the broader crude oil market.
Even before that development, the outlook for an agreement had been growing murkier. Iran said a pact on proposed shipping lanes was in the final stages, but the country has insisted that Washington is not part of the agreement with Oman, and hinted a normalization of the strait will depend on the lifting of an American blockade on Iranian ports, keeping traders on edge. "The longer the delays, the more prices will fade back to the upside," said Dennis Kissler, senior vice president for trading at BOK Financial Securities Inc.
Prices still holding most of the week's slump
The White House didn't respond to a request for comment on the announcement of a pending deal. Trump said at a rally in Las Vegas on Wednesday evening that the US is talking to Tehran and would watch how the negotiations unfold. Prices are holding most of this week's slump after Iran and the US indicated a resolution was close for shipping through the chokepoint. A return to normalized flows through Hormuz would unlock millions of barrels of shipments disrupted by the five-month-old conflict.
Fresh incidents keep traders on edge
Other risks emerged Thursday, reinforcing traders' reluctance to fully unwind long positions for fear of a sudden escalation. The UK Navy reported a tanker hearing two explosions while transiting the strait near Kumzar, Oman.
Iran-backed Houthi militants in Yemen said they targeted a Saudi oil tanker in the Gulf of Aden. The group's attacks in central and eastern Yemen killed at least 30 government troops, according to the AP. Elsewhere, oil loadings at the Caspian Pipeline Consortium terminal on the Black Sea resumed after being halted by the risk of nearby drone attacks.
Source: Rigzone
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