Oil prices were steady today and little changed for the week as traders held on to hopes that attempts to secure peace in the Middle East between the US and Iran would succeed.
Brent futures were up 17 cents, or 0.24%, to $71.97 a barrel this morning, while West Texas Intermediate was up two cents, or 0.03%, at $68.71 a barrel.
For the week, Brent was essentially unchanged, and WTI was down around 0.8%.
Oil prices were under pressure as investors’ hopes of a full reopening of the Strait of Hormuz were buoyed by peace talks between the US and Iran, Commerzbank analysts said.
US markets are closed today ahead of the US Independence Day holiday tomorrow.
The two benchmarks hit their lowest levels yesterday since before the US-Israeli war on Iran began in late February.
“The US-Iran dealmaking process remains fragile but continues for now, as the question of Strait of Hormuz tolls and administration remains contentious,” Citi analysts wrote today.
“We expect the MOU (memorandum of understanding) to hold, not because trust has suddenly emerged, but because the incentives to break are poor for both sides.”
Some shipping has resumed through the Strait of Hormuz, as called for under the initial US-Iranian deal, but uncertainty is high after the two countries exchanged strikes last weekend following an Iranian attack on a cargo ship.
With the prospect of being able to ship more oil, Gulf producers are working to increase output.
Kuwait’s oil production rose sharply to 1.65 million barrels per day in June from 580,000 bpd in May, a source familiar with the matter told Reuters yesterday.
At least five supertankers carrying a total of 10 million barrels of Saudi oil have exited the Strait of Hormuz and Saudi Aramco has switched to spot pricing from longer-term contracts to speed sales in Asia, according to trade sources and shipping data.
“A sustained recovery in crude prices is more likely to materialise once the oil currently stranded on tankers and held in storage has been absorbed by the market, and if the recovery in production proves insufficient to offset the volumes currently transiting the Strait of Hormuz,” said PVM analyst Tamas Varga.
