Oil prices managed a modest gain in volatile trading on Tuesday, as traders remained skeptical about the swift conclusion of an agreement that would restore energy shipments through the Strait of Hormuz, despite official claims of progress in negotiations.
West Texas Intermediate crude changed hands near $83 a barrel, having surged as much as 3% earlier in the session. Any news related to the potential for a deal to reopen the Strait of Hormuz has triggered dramatic swings in crude futures prices. The outlook for a deal was recently clouded by a fresh set of tough demands from US President Donald Trump directed at Iran, which had previously driven oil prices sharply higher.
Pakistan's defense minister stated on Tuesday that the US and Iran were "close to some sort of arrangement" regarding the Strait of Hormuz. Earlier, Al Jazeera reported, citing a Qatari Foreign Ministry spokesman, that negotiations between Iran and Oman to reopen the strait and allow a limited resumption of maritime traffic were at an advanced stage. Restoring the passage of vessels through this critical energy chokepoint is vital for rebalancing the global oil market. Before the conflict began, roughly one-fifth of the world's total oil and gas flows passed through the Strait of Hormuz.
"Pakistan's more optimistic signal could mean there is at least some communication between Iran and the US, which prompted some profit-taking in the market," said Arne Lohmann Rasmussen, chief analyst at Global Risk Management. "Many traders have their stop-losses set quite close, and after this week's sharp rise in oil prices, the incentive to book profits has also increased."
Crude prices have been highly volatile since the conflict erupted in late February. As tensions have escalated again in recent days, the rally in finished product prices has been even more pronounced. Diesel has been particularly hard hit, as the Russia-Ukraine war also squeezes supply, with the European benchmark diesel price more than doubling this year.
However, sporadic clashes across the region continue to keep traders on edge. Citing a US official, media reported that US forces fired on a Panama-flagged vessel early Tuesday that was attempting to breach the blockade of an Iranian port. Separately, a Libyan refinery was attacked on Monday. The conflict in the Middle East has also spread to the Red Sea, where Iran-backed Houthi rebels are threatening a key shipping lane, which has become a vital lifeline for Saudi Arabia since exports from the Persian Gulf were blocked by the Iran war. Following a Houthi claim of an attack on the Jizan refinery, Saudi Aramco has postponed the restart of that facility until late August.
On Tuesday, reports emerged of a fire at Russia's Rosneft Komsomolsk refinery in the Khabarovsk region, though the company stated production operations were not interrupted. In a separate incident, drone debris caused a fire at an industrial facility in Russia's Orenburg region, according to a local statement, an area that is home to the Orsk refinery owned by ForteInvest.
Prices: As of 1:22 p.m. New York time, West Texas Intermediate crude for September delivery rose 1.1% to $83.29 a barrel. Brent crude for October delivery increased 1% to $88.80 a barrel. Diesel futures on ICE Futures Europe gained 1.0% to $1,318 a metric ton.
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