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Oil prices were broadly steady on Tuesday, slipping about 1% as investors kept a close watch on crude flows through the Strait of Hormuz following signs of progress in U.S.-Iran peace talks.
Brent crude futures were down 87 cents or 1.1%, at $77.03 a barrel while U.S. West Texas Intermediate fell 73 cents, or 1%, at $73.13 a barrel at 12:05 p.m. ET (1606 GMT), after earlier dropping to a near four-month low of $72.48.
Prices fell more than 3% on Monday after the United States granted Iran a 60-day sanctions waiver following initial peace talks, and as officials reported a lull in hostilities in Lebanon under a broader agreement.
Oman and Iran agreed on Tuesday to press on with discussions about the future administration of navigation in the Strait of Hormuz, including maritime services in the strategic waterway and the costs associated with them.
Geopolitical risk, however, persisted as Lebanon’s Hezbollah said Israeli forces opened fire on civilians in southern Lebanon on Tuesday and that the incident violated the ceasefire agreement.
This came as Lebanon and Israel began a new round of talks on Tuesday in Washington, with Beirut determined to press ahead with direct negotiations even as they appear to be overshadowed by Iran’s decision to make Lebanon part of its talks with the U.S.
The world has lost millions of barrels of oil and gas supply since the Iran war closed the strait, a chokepoint for about a fifth of the world’s oil and LNG supplies, for more than three months.
Following peace talks, a limited number of vessels are being allowed to pass through the strait each day under coordination with Iran’s Revolutionary Guards Navy, an Iranian military source told Fars news agency on Tuesday.
Two stranded supertankers passed through the strait on Tuesday, while seven empty Qatar-linked liquefied natural gas tankers have entered in recent weeks in an early sign Gulf gas shipping may be resuming, ship-tracking data showed. Separately, the United Nations’ shipping agency said an evacuation plan to enable hundreds of ships with 11,000 seafarers stranded in the Gulf to sail through Hormuz is underway after Iran and the U.S. reached a ceasefire deal.
U.S. President Donald Trump said 19 million barrels of oil flowed out of the strait on Monday, and pointed to falling oil prices in a social media post on Tuesday.
Still, in the short term, the easing of sanctions wouldn’t weigh on prices much, said Ole Hvalbye, market analyst at SEB Research, as the U.S.-Iranian memorandum of understanding was still new and fragile.
MINES IN THE STRAIT
“Ship owners and operators will require assurances that the threats posed by mines have been fully eliminated. Damaged ports, debris in the water, and congestion present additional obstacles to an unconditional ramp-up in traffic,” said Tamas Varga, an analyst at PVM Oil Associates.
Iraq further increased output from its southern oilfields to around 2.1 million barrels per day as more tankers line up to load crude from its Gulf export terminals, two Iraqi oil officials told Reuters.
Russia, however, is considering a diesel export ban, Deputy Prime Minister Alexander Novak said on Tuesday, while a newspaper reported on possible fuel imports to tackle shortages, especially in Crimea.
Rabobank cut its oil price forecasts, citing eased disruption risks in the Gulf, and now sees Brent at $79 a barrel in the third quarter and $78 in the fourth quarter.
“While the aggressive unwinding of speculative long positions has pulled prices down from previous highs, historically low U.S. Strategic Petroleum Reserve levels are expected to keep a firm structural floor under the market in the weeks ahead,” energy consultancy Gelber & Associates wrote in a note.
REUTERS
