Oil prices remained close to $100 a barrel on Tuesday as markets awaited details of a proposed Iran-Oman arrangement to manage shipping through the Strait of Hormuz, while increased buying by Chinese refiners added to market tightness, Bloomberg reported.
Brent crude, the global benchmark, has gained 1.6% over the past two sessions, while West Texas Intermediate futures traded above $92 a barrel. Iran said an agreement with Oman was imminent and would provide a temporary safe passage through the strategic waterway. The development has also raised questions over the US response following strikes on Iranian tankers over the weekend. Tehran has warned that vessels could face attacks near Oman.
Renewed fighting between the US and Iran
Oil futures have climbed over the past week as renewed fighting between the US and Iran has heightened concerns about a deeper disruption to energy flows through the Strait of Hormuz. Chinese refiners have also stepped up purchases, pushing up the prices of crude from Africa, Canada and Latin America. Bloomberg noted that the buying surge does not necessarily indicate a sustained recovery in China's longer-term oil demand.
Brent has climbed more than 30% since the conflict began at the end of February, although prices remain below the late-April peak of $126 a barrel. Refined products, including diesel, have risen even more sharply as the Russia-Ukraine war has added to supply tightness.
Despite the heightened risks around Hormuz, crude and refined products continue to move out of the Persian Gulf. Around 7 million barrels a day of crude and refined fuels are currently passing through the strait, according to Macquarie Group Ltd., citing discussions with clients. That is substantially below the roughly 20 million barrels a day seen before the war. US officials have repeatedly said exports remain robust.
Iran-Oman working on Hormuz deal
Iran and Oman are working towards formalising arrangements governing the waterway, with transit fees potentially being introduced later, Bloomberg reported. The US, meanwhile, is blockading Iranian ports in an effort to restrict the country's oil exports and wants the Strait of Hormuz restored to its pre-war status as a freely navigable waterway.
Saudi Aramco's oil facilities in Jazan, near the Red Sea, were also targeted in a fresh attack on Monday. The strike did not cause significant 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 region to suspend operations.
Meanwhile, oil traders and industry executives are gathering in Singapore for the Asia Pacific Petroleum Conference, which begins Tuesday. Discussions are expected to focus on restricted crude flows through Hormuz, tightening global inventories and the outlook for Chinese oil demand.
