U.S. crude rose above $83 a barrel Tuesday after an Iranian official said the Strait of Hormuz will not reopen until Tehran's conditions are met. Prices had already spiked earlier in the session on President Donald Trump's demand that Iran pay reparations, a claim now made by both sides, while U.S. crude stockpiles have fallen to their lowest level in more than four decades.
Iran ties Hormuz reopening to its own terms
The secretary of Iran's Supreme National Security Council said the Strait of Hormuz will remain closed if the United States does not meet Tehran's conditions, according to Reuters. Oil prices rose in response: U.S. West Texas Intermediate futures gained 1.4% to $83.27 a barrel by 11:53 a.m. ET, while Brent crude, the international benchmark, added 1.3% to $88.85 a barrel.
Reparations dispute complicates a deal
U.S. crude had climbed as much as 3% earlier Tuesday after Trump demanded that Iran pay reparations to the U.S., dimming prospects for an agreement. Both sides are now demanding reparations from each other over claimed damages, and Trump has said the U.S. has 100% control of the Strait of Hormuz. Trump also extended, on Monday, the suspension of a shipping law restricting the transport of goods between American ports to U.S. vessels, narrowing the waiver to vessels hauling certain energy resources. The move came as U.S. government crude oil stockpiles fell to their lowest level in more than four decades.
According to CNBC, ING strategists wrote in a Tuesday note: "The oil market remains very headline-driven, which leaves prices whipsawing." They added that current rhetoric suggests any deal is still some way off, keeping risks skewed toward higher oil prices.
Hormuz talks advance despite the rhetoric
Even so, talks between Oman and Iran over shipping through the strait are at an advanced stage, Qatar's foreign ministry spokesperson said, according to Reuters. About 20% of global oil supplies passed through the Strait of Hormuz before the Iran war began on Feb. 28. Shipping traffic through the strait dropped to six vessels Monday, compared with a 10-day average of about 11. Separately, Pakistan's defense minister told Bloomberg News the U.S. and Iran are close to some sort of an arrangement. Brent futures have risen 5% over the past two days amid the back-and-forth between Washington and Tehran.
Sources: US Top News and Analysis, Reuters, Commodities & Futures News
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