Oil Gains as Iran War Negotiations Falter, Tanker Movements Slow
(Bloomberg) -- Oil gained on Friday as planned negotiations between the US and Iran were delayed and tanker traffic out of the Persian Gulf slowed.
Brent futures traded above $80 a barrel in London as Iran delayed the start of negotiations over a permanent peace deal with the US amid an uptick in fighting in southern Lebanon. Tanker traffic through the Strait of Hormuz thinned on Friday, a day after a surge in renewed oil flowed as the two countries vowed to lift a dual blockade.
An oil supertanker named the Desh Vibhor is once again in the process of heading toward the strait from within the Persian Gulf after briefly turning around, according to Bloomberg ship tracking data.
Oil has dropped 7.7% this week after the US and Iran signed a memorandum of understanding that would reopen the strait. The waterway where about a fifth of the world’s oil passes was shut for almost four months due to war that began Feb. 28. Optimism over the accord was tempered Thursday when US Vice President JD Vance paused a trip to Switzerland for further talks aimed at a wider settlement with the Islamic Republic.
Meanwhile, Israeli forces said they had continued strikes on Tehran-backed Hezbollah in Lebanon. A cessation of hostilities there was among Iran’s conditions for the interim deal. Israel and Hezbollah have now agreed to a ceasefire as of 4 p.m. local time, according to a US official, who asked to remain anonymous because the agreement isn’t public.
“There is going to be some stops and starts in this whole negotiation process,” Susan Bell, senior vice president of downstream research at Rystad Energy in Calgary, said by phone. “There is going to be posturing on both sides over the next 60 days.”
Tehran said that to cross Hormuz will require mandatory insurance policies, which are currently free but could be charged for down the line, as laid out in a document asserting its control over the waterway. Western naval groups have in recent days told ships they recommend taking a path via Oman’s coast, but said that other routes were available.
“While the deal is not necessarily dead on arrival, there appear to be real risks to its staying power,” Helima Croft, head of commodity markets strategy at RBC Capital Markets, said in a note. “Maritime logistical constraints, congressional opposition, and ongoing Israeli strikes in southern Lebanon” pose key threats to the normalization of oil flows, she added.
In a sign of producers adjusting to the shifting situation, Abu Dhabi National Oil Co. told customers to resume loadings of its crude oil from ports within the Persian Gulf, according to a notice sent by the company that was seen by Bloomberg. Adnoc declined to comment.
Kuwait has started boosting oil output and plans to exceed 2 million barrels a day within a week, Kuwait Petroleum Corp. Chief Executive Officer Sheikh Nawaf Al-Sabah said in an interview.
Supertankers laden with almost 80 million barrels of oil are sitting in the Persian Gulf and ready to cross the Strait of Hormuz at a moment’s notice if traders and shipowners give the go-ahead. Yet resuming tanker traffic could unleash a wave of supply that refiners in Asia may not immediately need, having already secured barrels to cover their short-term needs.
The process of fully reopening Hormuz may still prove to be a tricky and drawn-out operation. To run smoothly, the process needs to be choreographed, with ships in the right place, wells restarted, infrastructure repaired and steps agreed to de-mine the waterway. Some shipowners remain cautious about conditions in the strait and the Persian Gulf.
“Everyone would like to get the ships out, but the mood is that you don’t necessarily need to be the first,” said Jan Rindbo, chief executive officer of shipping company D/S Norden A/S. “With traffic resuming that will build confidence. But it’s still fragile, it will not take a lot for that confidence to disappear again.”
Trading was light on Friday due to the US Juneteenth holiday.
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