Oil prices hold above $91 as US-Iran tensions persist
Oil prices steadied in early trade on Thursday as investors assessed the outlook for the US-Iran war and the security of shipping through the Strait of Hormuz, according to CNBC. Brent crude futures for October delivery rose 25 cents to $91.87 a barrel, while US West Texas Intermediate crude futures for September slipped 2 cents to $85.81. The more active October WTI contract gained 14 cents to $84.53.
Both benchmarks have gained for a fourth straight session, settling at their highest since July 24, CNBC reported. The September WTI contract is set to expire later on Thursday.
Geopolitical backdrop
The price movements come amid continued uncertainty over the conflict between the United States and Iran. The Economic Times reported that oil prices jumped above $91 per barrel in early trade on Tuesday amid fading hopes for a deal to end the war, with Brent rising 39 cents to $91.26 and WTI gaining 51 cents to $85.31.
Iran has declared it will adopt a "fully offensive" military posture as efforts to negotiate a permanent end to the war have stalled, according to a senior Iranian official quoted by Reuters in The Economic Times report. Washington has ruled out extending a temporary ceasefire agreement.
Iran has been negotiating an agreement with Oman on managing the Strait of Hormuz and says they are close to a deal, The Economic Times reported. US President Donald Trump responded to these negotiations with a threat to bomb Oman, a longstanding US security partner.
In a possible sign of diplomatic movement, media reports claimed that Trump had opened back-channel discussions with the Islamic Revolutionary Guard Corps, according to The Economic Times.
On Tuesday, Trump said no talks were taking place with Iran and that the Strait of Hormuz was open, while Iran said the waterway remained shut, CNBC reported.
Shipping through the Strait of Hormuz has slowed, with most shipowners avoiding the key waterway due to a lack of clear signalling on its reopening from a blockade, CNBC said, citing shipping data.
Supply disruptions and market outlook
Both Brent and WTI benchmarks gained more than 5% last week after attacks on tankers operated by Abu Dhabi National Oil Company in the Strait of Hormuz and an attack on a Saudi Aramco refinery, The Economic Times reported. The UAE has decided to suspend all financial and economic transactions with Iran until further notice, CNBC reported, a move that has refocused attention on fraught ties between the major Gulf oil producer and Iran.
Market analysts are watching for fresh momentum. "Oil prices remained elevated as the market is supported by sporadic attacks in the Middle East but lacks fresh momentum without a major escalation," Hiroyuki Kikukawa, chief strategist of Nissan Securities Investment, told CNBC. He added that the market is likely to maintain a gradual upward trend given uncertainty over peace talks and tensions involving the UAE, Oman and Iran.
Investment banks have offered contrasting views on the price path. JPMorgan estimated that every additional month of disruption could add $7 to $8 per barrel to Brent, potentially reaching $114 per barrel in three months, The Economic Times reported. Goldman Sachs warned that Brent could rise to $120 per barrel if shipping disruptions continue, but forecast Brent to average $80 in the fourth quarter and $75 next year.
US inventory data
In the US, crude and gasoline inventories rose and distillate stockpiles fell last week, the Energy Information Administration said on Wednesday. Crude inventories rose by 4.4 million barrels in the week ended August 14, compared with estimates for a 600,000-barrel draw, CNBC reported.
Perspectives
Iranian government: Iran has declared a "fully offensive" military posture as peace talks stalled, and insists the Strait of Hormuz remains shut. Iran has been negotiating with Oman on managing the strait and says a deal is close.
US administration: President Trump said no talks were taking place with Iran and that the Strait of Hormuz is open. Washington has ruled out extending a temporary ceasefire and threatened to bomb Oman over its negotiations with Iran.
Market analysts: Analysts at Nissan Securities see a gradual upward trend for oil prices amid uncertainty, while JPMorgan and Goldman Sachs offer divergent forecasts, with JPMorgan seeing potential for $114 Brent in three months and Goldman Sachs warning of $120 if disruptions continue.