Oil Prices Fall on Iran-Oman Talks Over Strait of Hormuz
Key Takeaways
- •Reuters reported that Iran and Oman were discussing a temporary navigational corridor and mine clearing in the Strait of Hormuz.
- •Brent crude was trading at $86.69 per barrel and West Texas Intermediate at $80.61 per barrel at the time of writing.
- •ING analysts said a Pakistani statement on peace-talk progress also contributed to the decline in crude prices.
- •The analysts warned that any Iran-Oman understanding would not by itself restore normal oil flows through the strait.
- •Windward said only one vessel passed through the Strait of Hormuz on Tuesday, with no outbound tanker traffic recorded over the prior 24 hours.
Crude oil prices fell earlier today after reports that Iran and Oman had renewed talks on joint management of the Strait of Hormuz, a development that markets interpreted as a possible step toward the waterway returning to normal traffic.
Reuters reported that the two countries were discussing “a joint temporary navigational corridor” and the clearing of mines from the strait. Following the reports, Brent crude was trading at $86.69 per barrel at the time of writing, while West Texas Intermediate was at $80.61 per barrel.
The Strait of Hormuz remains a key chokepoint for global energy flows, so even limited signs of reduced disruption tend to be closely watched by oil traders. Traders also appeared to dismiss the latest U.S. sanctions on Iran, which were aimed at further constraining the country’s oil trade.
ING commodity analysts wrote in a note earlier today that a Pakistani statement on progress in peace talks had also added to the downward pressure on crude prices. Still, the analysts cautioned against assuming that any agreement between Iran and Oman would quickly restore normal shipping conditions in the Persian Gulf.
“Any agreement between these two parties [Iran and Oman] does not mean we will see normalisation in oil flows through the key chokepoint,” Warren Patterson and Ewa Manthey wrote. “We would likely need to see the US lift its blockade on Iranian ports and ease sanctions on Iran before we see any move towards normalisation.”
Tanker-tracking data from Windward showed just one vessel passing through the Strait of Hormuz on Tuesday: a Barbados-flagged LPG carrier that entered the strait. The firm said there was no outbound tanker traffic recorded over the 24-hour period, and the vessel was operating in dark mode.
“The US claims that an average of 8-9m b/d of oil is flowing through the Strait of Hormuz, which may be achievable over short time periods,” ING’s Patterson and Manthey also wrote. “However, over a longer time frame, this number seems aggressive. Several ship-tracking estimates are coming in much lower, ranging from 2m b/d to around 6m b/d.”
By Irina Slav for Oilprice.com
