KUALA LUMPUR, Aug 4 — Oil prices rebounded slightly on Tuesday after plunging in the previous session amid concerns that Middle Eastern supply remains at risk, with a diplomatic resolution to the United States (US)-Iran war, which has disrupted shipments, still seeming unlikely.
Front-month Brent futures rose US$0.62, or 0.7 per cent, to US$84.39 a barrel as of 0055 GMT after dropping seven per cent in the previous session to a three-week low.
U.S. West Texas Intermediate crude was US$0.61, or 0.7 per cent higher at US$80.95 after falling over five per cent in the previous session to its lowest in nearly a week.
Prices dropped after US President Donald Trump said on Sunday that he was holding off on new attacks on Iran pending ongoing talks to end their war and settle claims over control of the key Strait of Hormuz. The waterway connects Gulf oil producers to global markets, and before the conflict, energy exports equal to about 20 per cent of total consumption transited daily.
However, on Monday, Iran's Foreign Ministry spokesman Esmail Baghaei rejected Trump's claim, saying that no negotiations with the US were taking place and that no meetings were scheduled.
"Some of the sting has been taken out of oil prices...with Trump pausing strikes on Iran and touting a return to negotiations (though) the move lower remains fragile — oil could just as easily rebound higher if missiles start flying again or if tankers around the Strait of Hormuz come under fire once more," said KCM Trade chief market analyst Tim Waterer.
The dispute over the Strait remains a central point of contention. Washington says the memorandum of understanding agreed in June required Iran to open the waterway, while Tehran argues the text explicitly preserved its authority.
Analysts at Barclays said in the week ended July 31 crude oil and refined product net exports through the strait averaged 4.2 million barrels per day (bpd), compared with 3.2 million bpd the previous week.
On Monday, shipping data showed that six Saudi-flagged supertankers in the Red Sea recently changed course in the Gulf of Aden and are heading to southern Africa, while two tankers laden with Saudi oil crossed the Bab el-Mandeb Strait.
Traffic in the Strait of Hormuz between Iran and Oman also slowed following reports of attacks on vessels
The Strait of Hormuz remains dangerous for vessels. On Tuesday, the United Kingdom Maritime Trade Operations on Tuesday said it received a report of an incident 20 nautical miles (37km) northeast of Oman's Al Khasab, after a cargo vessel broadcast over VHF channel 16 that it had been hit by an unknown projectile
"While the fighting between Saudi Arabia and the Houthis has not completely halted energy flows, it has forced longer voyage times, higher insurance costs and occasional diversions.
"With the Strait of Hormuz, it keeps a dual-chokepoint risk in the market that prevents oil from fully unwinding its geopolitical premium," Waterer said.
