Oil prices were broadly stable on Monday as traders weighed tentative progress towards reopening the Strait of Hormuz against Iran’s insistence that Washington must meet several additional conditions before unrestricted shipping can resume through the strategically important waterway.
Brent crude futures were up 19 cents at $83.74 per barrel by 0807 GMT, while U.S. West Texas Intermediate crude futures edged 3 cents higher to $78.21.
Both benchmarks had dropped more than 7% during the previous week as markets became increasingly optimistic that negotiations between Iran and Oman could produce an agreement allowing the Strait of Hormuz to reopen. Before the Middle East conflict began at the end of February, the route handled approximately one-fifth of global oil and liquefied natural gas supplies.
Iran maintains conditions for restoring Hormuz traffic
Iran said on Sunday that its agreement with Oman was approaching its final stages, but Tehran reiterated that full access to the waterway would only be restored once the United States had satisfied other demands.
Among those conditions is compensation from Washington for widespread U.S. attacks against Iran, leaving significant obstacles before normal tanker movements through the Persian Gulf can resume.
Iranian Foreign Minister Abbas Araqchi also said on Sunday that Tehran and Washington are not currently engaged in negotiations. According to Araqchi, Iran will not enter talks while the U.S. continues to breach an interim agreement signed in June.
The latest comments have reduced expectations for an immediate reopening of Hormuz and kept a geopolitical premium embedded in crude prices despite the sharp losses recorded last week.
Regional attacks add to supply concerns
Additional risks to energy supplies emerged after the Iran-aligned Houthis said they had attacked Saudi Aramco’s Jazan refinery on Sunday.
The reported strike came two days after Saudi Arabia signed a defence agreement with Sunni Muslim allies Turkey and Pakistan as the kingdom responds to increasing regional instability stemming from the U.S.-Israeli conflict with Shi’ite Iran.
Separately, UAE oil producer ADNOC said on Friday that 15 of its vessels had been attacked while travelling through the Strait of Hormuz since the conflict began, highlighting the continuing security risks facing commercial shipping in the region.
“Any major progress towards restoring unrestricted shipping could exert downward pressure on oil prices, while a breakdown in negotiations or renewed supply disruptions could quickly revive the geopolitical risk premium,” said Sugandha Sachdeva, founder of New Delhi-based research firm SS WealthStreet.