(Bloomberg) — Oil rose from a six-week low amid uncertainty over the outlook for a peace deal to end the war in Iran.
Brent traded above $92 a barrel after closing at its lowest since mid-April on Friday, while West Texas Intermediate was near $89. The US and Iran traded messages over the weekend seeking changes to a draft agreement that would extend a ceasefire and open the Strait of Hormuz, but it was unclear if the sides were making much progress.
The standoff follows a bout of optimism that some form of peace agreement would be reached — and that energy flows would resume through the Strait of Hormuz — that had caused the first monthly drop in crude prices this year. Brent is still up more than a quarter since the war started at the end of February, as the near-total closure of the vital waterway causes unprecedented turmoil in oil markets.
“Neither Iran nor the US are capitulating or compromising on their red lines for an agreement, some of which have not changed since before the war,” said Hamzeh Al Gaaod, an independent economist for the Middle East and North Africa region, which include nuclear programs, control of the strait, ballistic missile programs and sanctions. Oil prices are likely to remain sensitive to developments on the ground and comments from political leaders, he said.
President Donald Trump hasn’t spoken on the subject of Iran since a White House Situation Room meeting Friday, in which he said he expected to announce an agreement to prolong the current truce with Iran by 60 days. In a social media post earlier that day he reiterated his demands, including that Iran suspend its nuclear program and fully restore the strait to its earlier status as a free, international waterway.
The semi-official Tasnim news agency, which has close ties to the Iranian Revolutionary Guard Corps, said Sunday that amendments continue to be proposed by both sides, but noted that both the US and Iran might ultimately reject the changes and the deal would collapse.
Meanwhile, Israel made its broadest incursion into Lebanon in a quarter-century as Hezbollah — Iran’s most powerful regional ally — stepped up attacks on Israel’s north. Tel Aviv is not party to the talks between Washington and Tehran and it’s not clear whether it will agree to stop its side war in Lebanon.
Roughly one-quarter of the non-Iranian large oil tankers trapped inside the Persian Gulf at the outbreak of the Iran war have managed to slip out in a slow, stealthy trickle. However, several vessels transiting through the Strait of Hormuz had been attacked in recent days, underscoring the “very real” risks that remain for shipowners, Chevron Corp. Chief Executive Officer Mike Wirth said Friday.
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–With assistance from Emma Sanchez.
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