Oil rises on concerns over Strait of Hormuz reopening plans
Oil tankers pass through the Strait of Hormuz, December 21, 2018. REUTERS/Hamad I Mohammed
NEW DELHI, Aug 7 : Oil extended gains on Friday amid further concerns around the opening of the Strait of Hormuz, as Iran, working with Oman, suggested banning vessels deemed hostile from the strait and heavily fining those which violated the proposed rules.
Brent crude futures were up 85 cents, or 1.03 per cent, at $83.34 a barrel by 0634 GMT. U.S. West Texas Intermediate futures rose 52 cents, or 0.67 per cent, to $77.81.
Oil futures settled up more than $3 a barrel on Thursday as Iran reviewed a bill to ban U.S. and Israeli vessels from the Strait of Hormuz, through which roughly a fifth of the world’s oil and liquefied natural gas normally transited before the war began at the end of February.
Prices fell earlier in the week as a possible solution to the ongoing conflict looked more likely, but benchmark Brent breached $80 on Thursday after falling below that for the first time since July 13. Both benchmarks were headed for a weekly loss of about 8 per cent.
Analysts said the events that have unfolded this week signalled that the hostilities between Iran and the U.S. are not yet over.
An Iranian lawmaker said a parliamentary committee is reviewing a preliminary bill to ban U.S., Israeli and other vessels deemed hostile from the Strait of Hormuz, and fine violators of the proposed restrictions up to 20 per cent of cargo value, according to the Fars news agency.
Oil prices are reacting to Iran's published draft plan for Hormuz transit conditions, said Lin Ye, vice president of commodities market – oil at consultancy Rystad Energy.
"That's not the market pricing in a bad deal, it's pricing in confirmation that whatever emerges is a managed/conditional corridor, not a restoration of normal flow," Ye added.
Iran is seeking fees of between 5 per cent and 7 per cent of the price of cargoes from ships using the strait, according to the senior Iranian official. Oman is discussing fees of around 3 per cent, while Washington wants no fees at all.
Four industry sources have said the proposed deal is not easily workable due to U.S. sanctions and restrictive insurance clauses on any payments.
While this week's signals on a potential deal "have driven a roller-coaster ride in market sentiment", for now the market is "in the dark as to what needs to happen for the agreement to be clinched", said Vandana Hari, founder of oil market analysis provider Vanda Insights.
Meanwhile, Yemen's Houthis said they carried out missile and drone attacks on "Saudi deployments" in Marib and Hadramout in Yemen on Thursday.
U.S. President Donald Trump on Thursday told reporters he believed the war would be over soon.
