Oil prices firm on concerns over Strait of Hormuz plans
Oil tankers pass through the Strait of Hormuz, December 21, 2018. REUTERS/Hamad I Mohammed
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LONDON, Aug 7 : Oil prices edged higher on Friday on further concerns surrounding the reopening of the Strait of Hormuz and potential Iranian bans and fines on vessels it deems hostile or in violation of proposed rules.
Brent crude futures were up 75 cents, or 0.9 per cent, at $83.24 a barrel by 0815 GMT. U.S. West Texas Intermediate futures rose 42 cents, or 0.5 per cent, to $77.71.
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.
Prices fell earlier in the week as a possible solution to the conflict looked more likely, and both benchmarks were on course for a weekly loss of about 8 per cent.
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Analysts said that this week’s developments have signalled that hostilities between Iran and the U.S. are not yet over.
Oil prices are reacting to Iran’s published draft plan for Hormuz transit conditions, said Rystad Energy analyst Lin Ye.
“That’s not the market pricing in a bad deal, it’s pricing in confirmation that whatever emerges is a managed/conditional corridor, not a restoration of normal flow,” Ye added.
Iran is seeking fees of between 5 per cent and 7 per cent of the price of cargoes from ships using the strait, a senior Iranian official said. Oman, meanwhile, is discussing fees of about 3 per cent 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.
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.
Meanwhile, Yemen’s Houthis said they carried out missile and drone attacks on Saudi deployments in Marib and Hadramout in Yemen on Thursday.
U.S. President Donald Trump told reporters on Thursday that he believed that the war would be over soon.
Investors are awaiting U.S. payrolls data later on Friday, which could offer a steer on U.S. Federal Reserve’s thinking on interest rates. Higher interest rates raise consumer costs, which can reduce economic growth and demand for oil.
Source: Reuters
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