Oil Steadies Near One-Week Highs as US-Iran Peace Deal Hopes Dim

Brent and WTI held close to their best levels in more than a week on Tuesday after President Trump demanded Iran pay compensation for U.S. damages, a move analysts say has widened the gap between Washington and Tehran over reopening the Strait of Hormuz.

SEATTLE (Oil Monster): Oil prices steadied on Tuesday at more than one-week highs amid fading hopes of a deal between the U.S. and Iran to end their war and reopen the Strait of Hormuz, after President Donald Trump demanded compensation for damage the U.S. has incurred.

Brent crude futures fell 10 cents, or 0.11%, to $87.62 a barrel by 0405 GMT, while U.S. West Texas Intermediate crude futures were down 5 cents, or 0.06%, to $82.08 a barrel.

Why Prices Are Holding Near One-Week Highs

Both benchmarks rose more than 5% on Monday to their highest since July 31, after Trump responded to Iran's conditions for a peace deal with his own demands that Iran pay compensation for people killed in wars, attacks and protests. That counter-demand is likely to complicate efforts to reopen the Strait of Hormuz.

Later in the day, Trump added that the U.S. had control of the strait and had swept the strategic oil waterway for Iranian mines.

What Analysts Are Saying About the US-Iran Rift

"There appears to be a gulf, no pun intended, between the U.S. and Iran over what any agreement would actually look like," said Tim Waterer, chief market analyst at KCM Trade. "As a result, some of the optimism that built up last week is being unwound, giving oil prices a decidedly bid tone."

Jazan Refinery Restart Pushed Back After Houthi Attacks

Saudi Aramco has postponed the restart of its 400,000-barrel-per-day Jazan refinery to August 30 after the Houthis claimed two attacks on the plant on Sunday.

"The chokehold risk around both the Strait of Hormuz and the Bab el-Mandeb remains highly significant. Even intermittent restrictions or the threat of further incidents keep insurance costs elevated and force longer shipping routes ... hence energy flows look likely to stay constrained near term," Waterer said.

How the Chokepoint Risk Is Affecting Flows

In a note on Monday, analysts at Barclays said that in the week ending August 7, crude oil and refined product net exports through the Strait of Hormuz averaged 3 million barrels per day, down from 4.4 million bpd the previous week.

Markets will likely remain in a state of morbid detachment if oil continues to slip through both blockades via ship-to-ship transfers and overland routes, said IG's analyst Tony Sycamore.

ADNOC Keeps Selling Spot Crude to Move Oil Out of the Strait

Meanwhile, the Abu Dhabi National Oil Company (ADNOC) is offering spot crude in a tender, its eighth issued since the start of June, as the UAE state oil company works to move oil from inside the Strait of Hormuz.

Courtesy: www.reuters.com