The Daily Journal.- Oil prices rose on Friday amid growing uncertainty over a potential agreement between Iran and Oman to reopen the Strait of Hormuz.
The market, which had hoped for an imminent solution earlier in the week, turned nervous again after Tehran signaled its intention to ban U.S. and Israeli vessels from passing through the vital maritime route in response to U.S. military threats.
According to Bloomberg data, European benchmark Brent crude rose $1.06 to $83.55 per barrel. Meanwhile, U.S. West Texas Intermediate (WTI) gained 89 cents to settle at $78.18.
Market swings between hope and uncertainty
Oil prices had plunged 11% earlier in the week after Iran announced a preliminary agreement with Oman to establish a safe maritime corridor through the strait. However, optimism quickly faded.
“It is not that the market is pricing in a bad deal, but rather confirming that, whatever the outcome, it will involve a controlled or conditional corridor, rather than a restoration of normal flows,” Lin Ye, an analyst at Rystad Energy, told Reuters.
According to a senior Iranian official, Iran seeks to charge fees ranging from 5% to 7% of the value of cargo passing through the strait. Oman, for its part, proposes a 3% fee, while Washington rejects any type of tariff. Industry sources consulted by Reuters warn that U.S. sanctions and restrictive insurance clauses make such an agreement unworkable.
Adding to the diplomatic uncertainty, Yemen’s Houthi rebels launched new attacks against targets in the strait and the Gulf of Aden. Andrew Lipow, president of Lipow Oil Associates, said that the longer the supply disruption continues, the further global crude inventories will decline.
With information from Bloomberg and Reuters
