Photo caption: Oil tankers pass through the Strait of Hormuz, December 21, 2018. REUTERS/Hamad I Mohammed/File Photo Purchase Licensing Rights
*Iran and Oman work on details of agreement on Strait of Hormuz
*U.S. crude stocks rose by less than expected last week, EIA says
*Commodity vessel transits through Strait of Hormuz fall to three-month low, data shows
Oil prices rose in a choppy session on Wednesday, as investors monitored talks between Iran and Oman on the Strait of Hormuz and a smaller-than-expected rise in U.S. crude stocks.
Reuters reported that Brent crude futures were up 48 cents, or 0.54%, to $89.06 a barrel at 12:37 p.m. EDT. West Texas Intermediate crude futures were up 68 cents, or 0.83%, at $83.04.
Both benchmarks fell to their lowest levels since August 10 earlier in the session on hopes of an increase in traffic through the strategic strait. They pared some losses after official oil stock data showed U.S. crude inventories rose by less than expected last week.
Crude inventories increased by 95,000 barrels to 428.9 million barrels in the week ended August 21, the Energy Information Administration said, compared with analysts’ expectations in a Reuters poll for a 597,000-barrel rise.
IRAN AND OMAN WORK ON DETAIL
Analysts said the talks between Iran and Oman had shifted the mood in the market.
“The market has moved from pricing a high probability of prolonged disruption and renewed escalation towards pricing partial reopening, negotiated shipping arrangements and a lower risk of renewed military confrontation,” said Saxo Bank head of commodity strategy Ole Hansen.
“A credible agreement that rapidly restores Hormuz traffic could remove another layer of geopolitical premium.”
Iran and Oman are working on the details of the agreement on the strait, a senior Iranian source said on Wednesday, after Iran’s Revolutionary Guards said the two countries had agreed how to share the waterway and its revenues.
Until U.S.-Israeli airstrikes began a war on Iran at the end of February, the Strait of Hormuz was the route for around a fifth of global oil and gas supplies.
Only five commodity vessels transited the waterway on Tuesday, preliminary data from ship tracker Kpler showed, down from the 10-day average of 15 and well below pre-war levels.
Efforts to reach a broader settlement to the Iran conflict are also continuing. Pakistan and Iran made “significant progress” in talks, Pakistan’s interior minister said on Tuesday at the end of a visit to Tehran.
Energy supply disruption linked to Russia’s war on Ukraine, showed no sign of easing.
Russia’s fourth-largest oil refinery and second-largest gasoline producer NORSI suspended crude oil processing on Wednesday after a Ukrainian drone attack, three industry sources said.
Russia is considering stepping up its ballistic missile strikes on Kyiv, including targets in the city centre, and on critical infrastructure elsewhere in Ukraine after concluding that efforts to negotiate a peace deal have reached a dead end, Bloomberg News reported on Wednesday, citing three people close to the Kremlin.
