Oil stabilizes near a one-week high as hopes for a deal with Iran fade

Oil prices settled on Tuesday at their highest levels in more than two weeks, as hopes faded for a deal between the United States and Iran to end their conflict and reopen the Strait of Hormuz, after U.S. President Donald Trump demanded compensation for damages incurred by his country.

By 00:13 GMT, Brent crude futures settled at $87.81 per barrel, while U.S. West Texas Intermediate (WTI) crude futures settled at $82.20.

The two benchmark crudes rose by more than 5 percent on Monday to their highest levels since July 31, after Trump responded to Iran’s conditions for reaching an agreement by demanding that the Islamic Republic pay compensation for deaths from wars, attacks, and protests, a move that is likely to complicate efforts to reopen the Strait of Hormuz.

He later added that the United States controls the strait and had removed Iranian mines from the important waterway for oil supplies.

Tim Waterer, chief market analyst at KCM Trade, said, “It seems there is a gap... between the United States and Iran regarding the actual form of any agreement.”

He added, “As a result, some of the optimism that emerged last week is fading, giving oil prices a clear bullish tone.”

Meanwhile, Saudi Aramco postponed the restart of the Jazan refinery, which has a capacity of 400,000 barrels per day, to August 30, after the Houthis announced two attacks on the refinery on Sunday.

Waterer continued, “The risk of restrictions around both the Strait of Hormuz and the Bab al-Mandab remains extremely high. Even intermittent restrictions or the threat of further attacks keep insurance costs high and impose longer shipping routes... Thus, energy flows are likely to remain constrained in the near term.”

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

On the other hand, Iraq raised the official selling price (OSP) for Basra Medium crude for Asian buyers for September by $2.50, setting it at a discount of $4 per barrel against the Oman/Dubai average.