Oil prices traded in a narrow range on Monday as investors reassessed prospects for restoring normal shipping through the Strait of Hormuz after Iran reiterated that several demands must be met before the key energy corridor can fully reopen.
Brent crude futures added 19 cents to $83.74 a barrel by 0807 GMT, while U.S. West Texas Intermediate futures were 3 cents higher at $78.21.
The modest gains followed a steep decline in the previous week, when both oil benchmarks lost more than 7%. That selloff was driven by expectations that Iran and Oman were moving closer to an agreement capable of reopening the Strait of Hormuz.
Before fighting erupted across the Middle East at the end of February, approximately one-fifth of worldwide oil and liquefied natural gas supplies travelled through the strait, making developments surrounding the shipping route a major influence on global energy prices.
Tehran complicates prospects for rapid return of shipping
Iran said on Sunday that its agreement with Oman over the waterway had entered its final stages. However, Tehran made clear that completing the arrangement would not automatically result in unrestricted shipping through Hormuz.
Iran continues to demand that Washington meet several additional conditions, including compensation for widespread U.S. attacks on the country, before the waterway can fully reopen.
Iranian Foreign Minister Abbas Araqchi separately said Tehran and Washington are not currently holding negotiations. He added that Iran would not begin talks while the U.S. continues to violate an interim agreement reached in June.
The comments have challenged expectations that commercial traffic through Hormuz could quickly return to normal and helped preserve some of the geopolitical premium in crude prices following last week’s sharp decline.
New regional attacks reinforce energy supply risks
Security concerns elsewhere in the region provided another source of support for oil markets after the Iran-aligned Houthis said they had targeted Saudi Aramco’s Jazan refinery on Sunday.
The reported attack came only two days after Saudi Arabia agreed a defence pact with Turkey and Pakistan, its Sunni Muslim allies, amid mounting regional instability stemming from the U.S.-Israeli conflict with Iran.
Further evidence of the risks facing energy shipping came from UAE producer ADNOC, which said on Friday that 15 of its vessels had been attacked while passing through the Strait of Hormuz since the conflict began.
The combination of unresolved negotiations and continuing attacks leaves crude markets particularly exposed to shifts in the regional security outlook.
“Any major progress towards restoring unrestricted shipping could exert downward pressure on oil prices, while a breakdown in negotiations or renewed supply disruptions could quickly revive the geopolitical risk premium,” said Sugandha Sachdeva, founder of New Delhi-based research firm SS WealthStreet.
Leave a Reply