Oil settles up on US-Iran strikes; cautious hopes for shipping cap gains

[HOUSTON] Oil prices settled up more than 1 per cent on Monday (Jun 29) after attacks by the US and Iran underscored the fragility of their interim peace deal, while cautious hopes of a continued recovery in energy shipping through the Strait of Hormuz limited gains.

Iranian and US technical teams working on the implementation of an interim peace deal are expected to meet in Doha in the coming days, a source told Reuters on Monday, after the tit-for-tat weekend strikes threatened to derail the accord.

Brent crude futures settled up US$1.16, or 1.61 per cent, at US$73.15 a barrel. US West Texas Intermediate crude gained US$1.52, or 2.2 per cent, to US$70.75.

Brent crude fell 10.6 per cent last week in a third consecutive weekly decline after crude shipments through the strait rose to their highest since the US-Israeli war on Iran began in late February. Iranian and Omani experts will start talks on redefining transit paths through the Strait of Hormuz in the coming days, Iranian Deputy Foreign Minister Kazem Gharibabadi told state TV on Monday, adding that his country will try to obstruct vessels outside of defined paths.

Outbound Persian Gulf crude exports are quickly rebounding to at least 75 per cent of pre-war levels, Gelber & Associates analysts said in a note on Monday.

However, analysts cautioned that traffic through the strait is far from being fully recovered, helping keep prices somewhat elevated.

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“I think that reality is starting to sink in. Not every barrel is going to come out the Gulf in the next week or two, you can’t really jam as many barrels through there as possible to pre-war levels. As long as the situation is risky, anyone owning a boat runs the risk of having that boat attacked as it heads through the strait,” said Bob Yawger, director of energy futures ⁠at Mizuho.

Mines in the waterway as well as insurance companies not yet being fully on board are also factors weighing on traffic through the strait, according to Yawger. Meanwhile, Middle East producers are pushing ahead with loading oil and LNG despite fresh ship attacks in the Strait of Hormuz and renewed strikes between the US and Iran in recent days, shipping data showed.

Saudi oil giant Aramco resumed crude oil loadings on Friday at its Ras Tanura terminal, west of the Strait of Hormuz, after they were halted for nearly four months. Loadings continued even after a helicopter belonging to the company crashed on Sunday at Ras Tanura, killing 14 nationals. The cause of the crash was unknown. REUTERS