Oil Extends Gain as Oman-Iran Accord on Hormuz Remains Elusive
(Bloomberg) -- Oil extended gains as Iran and Oman remained short of a deal to reopen the Strait of Hormuz, while Houthi militants claimed an attack on a Saudi refinery near the Red Sea.
Brent traded above $84 a barrel after climbing more than 5% over the previous three sessions. West Texas Intermediate was near $79. An agreement with Oman to establish a shipping route through Hormuz was “very close,” Iran’s Foreign Minister Abbas Araghchi said over the weekend, ruling out direct talks with the US for now because of violations of an interim peace deal reached in June.
Still, he cautioned that any deal would not immediately reopen the waterway, tempering hopes for a swift restoration of disrupted energy flows. President Donald Trump signaled patience, telling Axios on Sunday that the US was now “low-keying it.” The remarks followed weeks of Trump threatening massive strikes on Iran only to pull back.
“The bias stays bullish as long as the market is pricing the ‘possibility’ of disruption rather than the certainty of normalization,” said Haris Khurshid, chief investment officer at Chicago-based Karobaar Capital LP. “Until we see actual flows normalize, I think geopolitical risk keeps a floor under crude.”
Washington has repeatedly said it is involved in talks over the management of Hormuz, a claim disputed by Tehran. On Saturday, Iran reiterated its conditions for fully reopening the strait, including an end to the US naval blockade, the removal of sanctions and compensation for war damage.
Prior to the war, about a fifth of the world’s oil and natural gas was shipped through Hormuz to global markets. The market has been spared an extreme squeeze by a number of factors, including soft Chinese demand and the release of emergency reserves, but supply buffers have been worn perilously thin.
The risk of a renewed flare-up across the Middle East remains high, keeping markets on edge. Another tanker operated by Abu Dhabi National Oil Co. was targeted in Hormuz over the weekend while Iran-backed Houthi militants in Yemen claimed an attack on Saudi Arabia’s Jazan refinery.
The kingdom’s energy ministry said a fire was extinguished at Jazan early Sunday, without providing details on the cause. The blaze is at least the second in the past month at the facility, after satellite images showed a fire at a tank in late July following Houthi claims of an attack.
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