Oil Prices Hold Above One-Week Highs as US-Iran Talks Lose Momentum

Oil prices were largely steady on Tuesday near their highest level in more than a week as hopes for an agreement between the United States and Iran weakened, raising concerns about continued disruption around the Strait of Hormuz.

Brent crude futures fell 10 cents, or 0.11%, to $87.62 a barrel by 7:05 a.m. Saudi time. US West Texas Intermediate crude was down 5 cents, or 0.06%, at $82.08 a barrel.

Both benchmarks gained more than 5% on Monday, reaching their highest levels since July 31. The rally followed comments from US President Donald Trump after Iran outlined conditions for a possible peace agreement.

Trump called for Iran to compensate the US for people killed during wars, attacks and protests, adding another obstacle to negotiations aimed at ending the conflict and restoring passage through the Strait of Hormuz.

Later, Trump said the US had control of the strategic waterway and had cleared it of Iranian mines.

Tim Waterer, chief market analyst at KCM Trade, said the differences between Washington and Tehran suggested that expectations for a quick agreement were fading.

“As a result, some of the optimism that built up last week is being unwound,” he said.

The Strait of Hormuz remains a major concern for global energy markets because a substantial share of the world’s oil and liquefied natural gas shipments normally passes through the waterway.

Shipping disruptions have already reduced energy flows. Barclays analysts said crude oil and refined product exports through the Strait averaged about 3 million barrels per day in the week ending August 7, down from 4.4 million barrels per day a week earlier.

The Bab el-Mandeb strait is also adding to shipping concerns. Saudi Aramco has postponed the restart of its Jazan refinery, which has a capacity of 400,000 barrels per day, until August 30 after Yemen’s Houthi group claimed two attacks on the facility on Sunday.

Waterer said risks surrounding both waterways remained significant, with restrictions or threats of further attacks keeping insurance costs high and forcing vessels to take longer routes.

Meanwhile, Abu Dhabi National Oil Co. is offering spot crude through a tender, marking its eighth such offering since the beginning of June as the UAE state-owned producer seeks ways to move oil from inside the Strait of Hormuz.

Analysts said oil markets could remain sensitive to developments in the region, particularly any change in the prospects for reopening the key shipping route.