Aug 4 (Reuters) – Oil prices rose more than 2% on Tuesday as a diplomatic resolution to the U.S.-Iran conflict remained uncertain, while disruptions to oil flows through key shipping routes persisted.
Front-month Brent futures rose $2.27, or 2.71%, to $86.04 a barrel by 0944 GMT after dropping 7% in the previous session to a three-week low.
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U.S. West Texas Intermediate (WTI) crude was up $1.72, or 2.14%, at $82.06 a barrel after falling more than 5% in the previous session to its lowest in nearly a week.
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Prices had dropped after U.S. President Donald Trump said on Sunday he was holding off on new attacks on Iran pending ongoing talks to end their war and settle claims over control of the key Strait of Hormuz.
On Monday, however, Iran’s Foreign Ministry spokesman Esmail Baghaei rejected Trump’s claim, saying no negotiations with the U.S. were taking place and no meetings were scheduled.
“Renewed strikes on vessels in the Strait of Hormuz and still restricted flows of ships have supported oil prices,” said Giovanni Staunovo, a UBS analyst.
“While production in the Middle East has recovered from the lows, it remains below pre-conflict levels, keeping the oil market undersupplied.”
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GULF SHIPPING TRAFFIC LITTLE CHANGED
The Hormuz dispute is a central sticking point in talks. Before the conflict began in late February, the Strait of Hormuz handled about one-fifth of global daily oil and liquefied natural gas supplies.
Iran wants control over inbound shipping through the Strait of Hormuz and visibility over outbound traffic, with the ability to intervene if necessary, under a plan being discussed with Oman to reopen the strategic waterway, a senior Iranian source told Reuters on Tuesday.
“Gulf exports remained under pressure, with Strait of Hormuz transits only marginally improving from extremely depressed levels. The export disruption story is intact, with Iranian attacks on vessels constraining flows,” ANZ analysts said.
Shipping traffic at the key Gulf waterways of Bab el-Mandeb and the Strait of Hormuz held largely unchanged at the start of the week.
Hormuz remains dangerous for vessels. On Tuesday, the UK Maritime Trade Operations agency flagged an incident 20 nautical miles (37 km) northeast of Oman’s Al Khasab, after a cargo vessel broadcast that it had been hit by an unknown projectile.
In the Red Sea, six Saudi-flagged supertankers changed course in the Gulf of Aden recently for southern Africa, while two tankers laden with Saudi oil crossed the Bab el-Mandeb Strait, shipping data showed on Monday.
Goldman Sachs expects Brent to remain in an $80-$90 a barrel range until there is either confirmation of a new U.S.-Iran agreement or a significant escalation in attacks and targets.
The bank said the physical oil market was tightening, with its global visible stocks counter showing inventories falling by 6.3 million barrels per day over the past two weeks, likely driven by lower flows from the Gulf and Red Sea, reduced Russian oil exports, and stronger Asian imports, including from China.
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Reporting by Anushree Mukherjee and Ishaan Arora in Bengaluru and Trixie Yap in Singapore; Editing by Christian Schmollinger, Andrei Khalip and Susan Fenton
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