Oil prices reverse after Iranian comments revive hopes of US talks

TEHRAN: Oil prices gave up early gains on Monday after Iran’s foreign ministry said engagement with the United States could still be pursued if it served national interests, easing some immediate fears over supply disruption through the Strait of Hormuz.

Brent crude was down 16 cents, or 0.18%, at $87.94 a barrel by 0922 GMT after earlier climbing to $91.42, its highest level since June 11. US West Texas Intermediate fell 68 cents, or 0.82%, to $81.81 after touching $85.39, its strongest level since June 12.

Prices had earlier risen to more than one-month highs on concern that conflict-related disruption in the Strait of Hormuz could affect shipments. Iran’s foreign ministry spokesperson Esmaeil Baghaei said intermediaries had passed messages to Tehran in recent days, though he did not spell out the contents of the proposals.

UBS analyst Giovanni Staunovo linked the market reversal to those remarks.

"Comments from Iran’s foreign ministry spokesperson saying ​that the country has received new proposals from mediators have seen oil prices giving up all earlier gains, though flows through ​the Strait of Hormuz remain depressed"

Shipping concerns remain in focus

Despite the price pullback, tanker traffic through the strait remained weak. Prices had extended last week’s sharp gains earlier in the day as traders reacted to recent hostilities between the United States and Iran that have constrained oil movement through the waterway.

The conflict intensified over the weekend, with the United States carrying out a ninth consecutive night of attacks on Iran, while Kuwait and Bahrain, both US allies, reported further Iranian strikes.

Iran’s Islamic Revolutionary Guard Corps said on Monday that two oil tankers were left immobilised after explosions while trying to pass through what it called an unsafe southern route in the Strait of Hormuz. It alleged the vessels had been encouraged by the US military to take that route. Reuters said it could not immediately verify the account.

ANZ analysts said the supply outlook had turned more negative as any expected rebound in shipping had effectively stalled. They said transit through the Strait of Hormuz had dropped to single-digit vessel numbers.

Transit volumes fall as risks widen

LSEG data showed that four vessels passed through the Strait of Hormuz on Sunday, compared with eight a day earlier. Since Friday, at least three oil product tankers and one very large crude carrier have entered the strait to load cargoes, the same data showed.

The United Kingdom Maritime Trade Operations centre also said early on Monday that a vessel was on fire northwest of Kumzar in Oman.

Gulf states raised crude and condensate exports in the first half of July to their highest level since before the Iran war began in late February, based on shipping data. Even so, flows through the Strait of Hormuz are now slowing again as fighting intensifies.

The breakdown of a US-Iran truce had renewed concern over energy supplies passing through the chokepoint. Before the Iran war, about 20% of global oil supplies moved through the strait. Iran has also urged the Houthis to shut the Red Sea route if the United States attacks Iranian power infrastructure.