Oil prices drop 4% after Qatar, Bessent raise hopes of a US-Iran deal

[BENGALURU/SINGAPORE] Oil prices fell by around 4 per cent on Tuesday (Aug 4) to a three-week low after comments by Qatar and US Treasury Secretary Scott Bessent raised hopes for a diplomatic resolution to the US-Iran conflict, which would improve oil flows through the Strait of Hormuz.

Front-month Brent futures fell US$3.11, or 3.71 per cent, to US$80.66 a barrel by 1159 GMT after hitting a session high of US$86.33.

U.S. West Texas Intermediate (WTI) crude was down US$3.58, or 4.46 per cent, at US$76.76 a barrel after touching a session high of US$82.33.

Both contracts fell to their lowest levels since Jul 13.

Earlier in the session, both benchmarks had risen more than 2 per cent on uncertainty over prospects for a US-Iran agreement.

“Oil prices are pairing earlier gains on comments from Qatari officials saying a potential US-Iran resolution has been drafted,” said Giovanni Staunovo, a UBS analyst.

Qatar Foreign Ministry spokesperson Majed Al Ansari said efforts to secure a diplomatic resolution to the conflict were continuing, with mediators including Qatar, Pakistan and Oman coordinating closely to facilitate negotiations and exchange draft proposals between the two sides.

US Treasury Secretary Bessent said that a deal with Iran to reopen the Strait of Hormuz could come as soon as Tuesday or Wednesday.

Bessent told CNBC he had seen “quite a few” ships exiting the Strait of Hormuz.

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Staunovo added that while production in the Middle East has “recovered from the lows, it remains below pre-conflict levels, keeping the oil market undersupplied”.

Gulf shipping traffic little changed

The Hormuz dispute is a central sticking point in talks. Before the conflict began in late February, the Strait of Hormuz handled about one-fifth of global daily oil and liquefied natural gas supplies.

“Gulf exports remained under pressure, with Strait of Hormuz transits only marginally improving from extremely depressed levels,” ANZ analysts said. “The export disruption story is intact, with Iranian attacks on vessels constraining flows.”

Shipping traffic at the key Gulf waterways of Bab el-Mandeb and the Strait of Hormuz held largely unchanged at the start of the week.

Hormuz remains dangerous for vessels. On Tuesday, the UK Maritime Trade Operations agency flagged an incident 37 km north-east of Oman’s Al Khasab, after a cargo vessel broadcast that it had been hit by an unknown projectile.

In the Red Sea, six Saudi-flagged supertankers changed course in the Gulf of Aden recently for southern Africa, while two tankers laden with Saudi oil crossed the Bab el-Mandeb Strait, shipping data showed on Monday.

Goldman Sachs expects Brent to remain in the range of US$80 to $90 a barrel until there is either confirmation of a new US-Iran agreement or a significant escalation in attacks and targets.

The bank said the physical oil market was tightening, with its global visible stocks counter showing inventories falling by 6.3 million barrels per day over the past two weeks, likely driven by lower flows from the Persian Gulf and Red Sea, reduced Russian oil exports and stronger Asian imports, including from China. REUTERS