Oil prices slip as markets weigh a potential deal to reopen the Strait of Hormuz, easing supply fears despite ongoing tensions and sanctions hurdles
LONDON: Oil prices edged lower on Friday as investors weighed signals that Oman and Iran were closing in on a deal to reopen the Strait of Hormuz under a temporary arrangement aimed at allowing for broader talks to bring the Iran war to a close.
Brent crude futures were down 70 cents, or 0.85%, at $81.79 a barrel at 1303 GMT. U.S. West Texas Intermediate futures fell 53 cents, or 0.69%, to $76.76.
Oil futures settled more than $3 a barrel higher on Thursday as Iran reviewed a bill to ban U.S. and Israeli vessels from the Strait of Hormuz, through which roughly a fifth of the world’s oil and liquefied natural gas normally passed before the war began at the end of February.
Oil prices fell earlier in the week as a possible solution to the conflict looked more likely, and both benchmarks are on course for a weekly loss of more than 9%.
Still, analysts said that this week’s developments have signalled that hostilities between Iran and the U.S. are not yet over.
Iran is reportedly seeking fees of between 5% and 7% of the price of cargoes from ships using the strait, a senior Iranian official said. Oman, meanwhile, is discussing fees of about 3% while Washington wants no fees at all.
Four industry sources have said the proposed deal is not easily workable because of U.S. sanctions and restrictive insurance clauses on any payments.
“The structure of the Iran-Oman agreement in its current form and the power it yields to Iran is nothing that (U.S. President Donald) Trump can accept politically,” said Bjarne Schieldrop at SEB Research. “Trump would face heavy political criticism at home if he did.”
While this week’s signals on a potential deal have driven a roller-coaster ride in market sentiment, the market remains in the dark as to what needs to happen for the agreement to be clinched, said Vandana Hari, founder of oil market analysis provider Vanda Insights.
