Oil near US$100 as Iran says Hormuz deal with Oman is close

BRENT oil held gains near US$100 a barrel as traders watched for details of an Iranian deal with Oman to manage shipping through the Strait of Hormuz, while strong Chinese buying tightened the market.

The global benchmark has climbed 1.6 per cent over the past two sessions, while West Texas Intermediate edged towards US$93 on Tuesday (Sep 8).

Iran said the agreement is imminent and will include a temporary safe route, raising questions about how the US would respond after it struck Iranian tankers over the weekend. Teheran warned that ships face the risk of attack near Oman.

Renewed fighting between the US and Iran over the past week has pushed up oil futures due to concerns about deeper disruptions to energy flows through Hormuz.

Chinese refiners have recently ramped up oil buying, driving up prices of African, Canadian and Latin American crudes, although the increase does not necessarily signal a revival in longer-term demand.

Brent has surged more than 30 per cent since the conflict began more than six months ago, although the benchmark is well below the high above US$126 a barrel reached in late April.

Refined fuels such as diesel have rallied even further as the Russia-Ukraine war added to tightness. 

“Markets are increasingly pricing a prolonged Mideast conflict,” Goldman Sachs analysts including Daan Struyven wrote in a note, modestly raising their oil-price estimates on the assumption that shipping disruptions will persist into 2027.

“Risks to our price forecast remain significantly tilted to the upside.”

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Iran and Oman have been seeking to formalise control of the strait, and could eventually charge transit fees.

The US, which is blockading Iranian ports to curb exports from the Islamic Republic, wants Hormuz to return to its pre-war status as a freely navigable waterway.

Despite risks to shipping, oil shipments continue to exit the Persian Gulf. Daily flows through Hormuz remain at roughly 10 million barrels, mostly crude, Vitol Group chief executive officer Russell Hardy said at the Asia Pacific Petroleum Conference in Singapore on Tuesday.

Still, he warned that oil product markets are flashing signs of tightness.

Meanwhile, Saudi Aramco’s oil facilities in Jazan near the Red Sea came under fresh attack on Monday, although the strike did not cause major damage, according to people familiar with the matter.

It was the latest in a series of attacks that have already forced a major refinery in the area to halt operations.

Following the recent flare-up in hostilities, Iranian official Mohsen Rezaee said the “operational posture towards US warships and bases has been fundamentally recalibrated”.

The US has been given “clear warning” about Iran’s missiles in recent days, the senior security official said in a post on X.

“We’ve seen so many twists and turns since late February, and every time we thought we were going to get somewhere, it has been ripped apart,” said Chris Weston, head of research at Pepperstone Group. “We’re back to almost square one.” BLOOMBERG