Oil Maintains Its Largest Gains in a Month Amidst Stagnation of Washington-Tehran Talks

SadaNews - Oil prices stabilized after their biggest gains in about a month, as uncertainty regarding the status of peace talks between the United States and Iran increased the risk of prolonged energy flow reductions from the Arabian Gulf.

Brent crude for August delivery traded under $95 a barrel after rising 4.2% in the previous session, while West Texas Intermediate crude traded near $92 a barrel. Prices surged on Monday after a report indicated that Tehran had halted talks with Washington in protest of Israeli attacks in Lebanon, before trimming gains following U.S. President Donald Trump's statement that negotiations were ongoing.

The U.S. President stated that a memorandum of understanding with Iran to reopen the Strait of Hormuz could be reached within the next week, according to a phone interview he conducted with ABC News. He added that Washington still needed "a few additional points" before reaching an agreement.

The Future of Energy Flows through the Strait of Hormuz

The lack of clarity regarding the potential extension of the current ceasefire and the future of energy flows through the Strait of Hormuz has led to fluctuations in oil prices, which fell last month against a backdrop of optimism about the possibility of reaching an agreement. A report by the semi-official Tasnim news agency indicated that Tehran and its regional agents are considering a complete closure of the Strait of Hormuz, as well as the Bab al-Mandab Strait at the southern end of the Red Sea, which is a vital alternative for oil exports.

Lynn Tran, a market analyst at XS.com in Ho Chi Minh City, Vietnam, stated: "As long as flows through the Strait of Hormuz do not return to normal and the negotiation process between the U.S. and Iran remains uncertain, oil prices are likely to remain high and volatile."

Adding to the confusion, Trump and Israeli Prime Minister Benjamin Netanyahu provided disparate accounts regarding a call about the fighting in Lebanon. The Lebanese presidency stated in a post that a U.S.-mediated ceasefire between Tel Aviv and Iran-backed Hezbollah should be extended from Beirut to include all Lebanese territory, with further negotiations taking place on Tuesday and Wednesday.

The primary focus in the oil market remains on the vital Strait of Hormuz, through which nearly one-fifth of global oil and LNG supplies pass. Visible commercial traffic through the waterway has remained constrained since Friday, amid ongoing renewed tensions in diplomacy between the U.S. and Iran, increasing uncertainty in shipping.

In the latest trades, August Brent crude futures fell 0.4% to $94.60 per barrel by 11:20 AM Singapore time, while July West Texas Intermediate crude futures dropped 0.5% to $91.73 per barrel.