Market News

(Bloomberg) -- Oil dropped on hopes that the US and Iran will reach a peace deal despite fresh hostilities and uncertainty over the vital Strait of Hormuz.

Brent fell to near $96 a barrel after rising almost 4% on Tuesday, while West Texas Intermediate was around $90. An Iranian official said on Wednesday that indirect contacts with the US are ongoing and that the country’s stockpile of highly enriched uranium is not on the agenda for talks. US Secretary of State Marco Rubio has cautioned that any peace pact would likely take a few days to finalize.

The strait, the key waterway through which a fifth of the world’s oil and liquefied natural gas flowed during peacetime, remains essentially shut, subject to blockades by the US and Iran. However, at least two non-Iranian supertankers exited the chokepoint on Tuesday, the first time in a week that 4 million barrels of unsanctioned crude have crossed Hormuz.

“The decline in prices came partly after US Secretary of State Marco Rubio said that an interim agreement is only a couple of days away,” said Arne Lohmann Rasmussen, chief analyst at A/S Global Risk Management. “We should expect another nervous day. For now, however, the market will likely remain optimistic, assuming it is only a matter of time before the Strait of Hormuz reopens.”

In a sign of easing concerns around supplies in Europe, France’s finance minister told RMC Radio and BFM TV that for the next two months the country wasn’t concerned about the availability of diesel, gasoline and jet fuel.

“Holiday trips will be fine,” he said.

In the US, President Donald Trump will convene his cabinet at the White House Wednesday, moving from the originally planned location at the presidential retreat Camp David due to weather. This comes as key sticking points remain in the talks with Iran, including Tehran’s $24 billion in frozen assets and its reluctance to allow free passage through the strait.

Elsewhere, Russia is weighing curbs on diesel exports, according to Interfax. The country is a key exporter of the fuel.

--With assistance from Will Kubzansky and Sarah Chen.