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Oil Rebounds as Strikes Near Hormuz Muddy Outlook for Iran Deal - BLOOMBERG
BY Nicholas Lua and Alex Longley
(Bloomberg) -- Oil rebounded as fresh US military strikes in Iran clouded the outlook for a deal to reopen the Strait of Hormuz, with talks set to continue for several more days.
Global benchmark Brent rose toward $100 a barrel after slumping more than 7% on Monday, while West Texas Intermediate was near $93. US forces struck missile-launch sites and boats trying to place mines, US Central Command said, after Iranian media reported explosions around the strait.
Negotiations will still “take a few days” as both sides discuss language in an initial document, Secretary of State Marco Rubio told reporters in India on Tuesday. Iran’s Supreme Leader said the Middle East will no longer be a shield for US military bases.
Crude had retreated sharply in the week’s opening session as President Donald Trump posted that the talks were “proceeding nicely,” while also threatening more attacks if they were unsuccessful. That followed a softening last week as the prospects of peace grew and a flurry of ships made their way out of Hormuz.
Oil prices that rallied in March and April are now on pace for a drop in May, as the fragile ceasefire and push to reopen Hormuz outweigh signs of fast-depleting stockpiles. The strait, the key waterway through which a fifth of the world’s oil and liquefied natural gas flowed during peacetime, remains essentially closed, subject to blockades by the US and Iran.
The two sides have been negotiating a deal that would see them extend the ceasefire for about two months, with Washington lifting its blockade and Tehran reopening Hormuz. Still, sticking points remain, with Tehran saying it must be able to manage traffic through the chokepoint, something the US, Arab states and Europe maintain cannot be allowed.
At present, it’s “premature to consider a peace deal will be reached let alone adhered to,” said Saul Kavonic, senior energy analyst at MST Marquee. “There have been claims by both sides of negotiation success, or the strait opening in the past few months already, only for it to not materialize.”
With Hormuz still largely closed, global oil inventories have been drawing at a record pace, according to a recent tally from the International Energy Agency. That’s put the spotlight on the US, where holdings — commercial and strategic combined — have been contracting at an unprecedented clip.
