Oil prices were little changed on Wednesday as investors assessed prospects for renewed US–Iran talks and the potential for supply to be released from the Middle East, where exports remain constrained by the closure of the Strait of Hormuz.
Brent crude futures were up 43 cents, or 0.5%, to $95.22 (R1 558) a barrel in the morning after falling 4.6% in the previous session.
US West Texas Intermediate crude was down 17 cents, or 0.2%, to $91.11. The contract dropped 7.9% the session before.
The war has mostly shut down the Strait of Hormuz, a key waterway for crude and refined product flows out of the Gulf to global buyers, particularly in Asia and Europe.
US President Donald Trump said talks with Tehran on ending the war could resume this week after delegates from Iran and the US concluded negotiations at the weekend without any agreement.
Blockade of Iranian ships in force
But the US has also enacted a blockade of shipping leaving Iranian ports that its military said on Wednesday has completely halted trade going in and out of the country by sea.
Despite a two-week ceasefire, transit through the Strait of Hormuz remains uncertain, with traffic at only a fraction of the 130-plus daily crossings that moved through the waterway before the war, sources said on Tuesday.
“The trajectory of oil prices will likely hinge less on battlefield developments and more on diplomatic momentum,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.
“Markets are increasingly reacting to headlines around negotiations rather than troop deployments.
“Each signal of renewed dialogue has been met with price declines, suggesting that traders are systematically unwinding the ‘war premium’ embedded into crude earlier this month.”
Refiners are desperately seeking alternative crude supplies, pushing up the premiums they are willing to pay for oil from areas such as the US Gulf Coast and North Sea.
A cargo of WTI (West Texas Intermediate, a high-quality, light, sweet crude oil that serves as the primary benchmark for oil pricing in North America) Midland for delivery to Rotterdam traded at a record premium of $22.80 a barrel above benchmark European prices on Tuesday.
A US destroyer stopped two oil tankers from leaving Iran on Tuesday, a US official said.
US midterm elections approaching
“The Strait of Hormuz is not Trump’s alone to reopen,” said SEB analyst Ole Hvalbye.
“Iran has its own calculus, and the regime may find it strategically useful to keep flows restricted even after any peace deal, whether to extract reparations, guarantee security, or simply to inflict political pain ahead of the US midterm elections in November.”
The market stands to lose some access to further supply after two US administration officials told Reuters on Tuesday that the US will not renew a 30-day waiver of sanctions on Iranian oil at sea that expires this week and quietly let a similar waiver on sanctions on Russian oil expire over the weekend.
Later in the day, markets will be watching for official US inventory data from the Energy Information Administration.
US crude oil stockpiles were expected to have risen slightly last week, while distillate and gasoline inventories likely fell, a Reuters poll showed.
Market sources familiar with American Petroleum Institute figures said on Tuesday US crude oil inventories jumped for a third straight week.
- Oil prices remained mostly stable amid expectations of renewed US-Iran talks and potential supply releases from the Middle East, despite the Strait of Hormuz closure limiting exports.
- Brent crude rose slightly to $95.22 per barrel, recovering from a previous dip, while US WTI crude fell marginally to $91.11 per barrel after a sharp prior drop.
- The US maintains a blockade on Iranian shipping, halting sea trade with Iran, while transit through the Strait of Hormuz continues at significantly reduced levels despite a ceasefire.
- Market reactions are driven more by diplomatic developments than battlefield activity, with traders adjusting prices as talks progress, reducing the "war premium" on oil.
- US sanctions on Iranian and Russian oil are tightening as waivers expire, raising concerns about future supply, and US crude inventories reportedly increased for the third consecutive week.
