Oil Holds Three-Day Drop as Iran, Oman Reach Hormuz Agreement
Oil held losses as Iran said it reached an agreement with Oman on a proposed shipping route through the Strait of Hormuz, raising the prospect of some energy flows resuming through the critical waterway.
(Bloomberg) -- Oil held losses as Iran said it reached an agreement with Oman on a proposed shipping route through the Strait of Hormuz, raising the prospect of some energy flows resuming through the critical waterway.
West Texas Intermediate traded near $75 a barrel, after losing 11% in the week’s first three sessions, while Brent closed above $79 on Wednesday. A joint statement from both countries is under review, and a deal would be struck if third parties don’t obstruct the process, an Iranian official said.
The route would be temporary and remain active for “two to four months,” Iranian Deputy Foreign Minister Kazem Gharibabadi told domestic media, adding that “this understanding does not mean the full reopening” of the strait.
Crude prices have declined on optimism that some form of accord to restore traffic through the waterway is near, with US President Donald Trump touting yet again that a deal is close. Still, uncertainties remain and traders have been reluctant to fully unwind long positions, wary of being caught wrong-footed by a sudden escalation.
“US oil prices have already fallen below $80 per barrel as the global oil market evaluates the potential of a deal with Iran,” said Rob Thummel, senior portfolio manager at Tortoise Capital. “If a deal is reached, then it is possible for oil to head toward $70 per barrel.”
In a sign of persistent risks to shipping in the Middle East, Iran-backed Houthi militants in Yemen said they targeted a Saudi oil tanker in the Gulf of Aden. The group also threatened others in the Red Sea.
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