Oil steadies as markets await possible US-Iran talks

LONDON: Oil prices fell on Tuesday, reversing the previous session’s gains, on expectations that peace talks between the U.S. and Iran will take place this week.

Brent crude futures edged down by 18 cents to $95.30 a barrel by 1255 GMT while U.S. West Texas Intermediate (WTI) for May lost 30 cents to $89.31. The WTI May contract expires on Tuesday and the more active June contract held steady at $87.35.

The Brent and WTI benchmarks surged on Monday, rising by 5.6% and 6.9% respectively after Iran shut the Strait of Hormuz gain and the U.S. seized an Iranian cargo ship as part of its ports blockade.

Investors are focused on whether potential talks this week might result in an extension of the existing ceasefire or a final agreement, though further disruption to oil flows remains likely.

“The market (is) inclined to believe that, before the expiration of the ceasefire tomorrow, at least an extension will be reached between the U.S. and Iran, and that the Israeli–Lebanese talks scheduled for Thursday will not disappoint either,” said PVM Oil Associates analyst Tamas Varga.

2nd round of talks may extend ceasefire, boost peace hopes

Underscoring the uncertainty, an Iranian official said that no decision had been made to attend talks while Iranian Foreign Minister Abbas Araqchi said that “continued violations of the ceasefire” by the U.S. were a hindrance to further negotiations.

Shipping through the Strait of Hormuz, a corridor for about a fifth of the world’s oil supply, remained limited on Monday and EU Energy Commissioner Dan Jorgensen said that fuel shortages would result in a difficult summer for Europe, even in a best-case scenario.

Meanwhile, firefighters were still tackling a blaze at Russia’s Black Sea port of Tuapse on Tuesday, more than 24 hours after a Ukrainian drone attack, local authorities said. Tuapse is an oil product export hub and home to an oil refinery of the same name, owned by Rosneft.

Russia has been forced to reduce oil output in April by nearly 300,000 to 400,000 barrels per day because of Ukrainian drone attacks on ports and refineries and halt supplies via the only remaining Russian oil pipeline to Europe, according to five sources and Reuters calculations.

Russia is also set to stop oil exports from Kazakhstan to Germany via the Druzhba pipeline from May 1, three industry sources told Reuters. Kazakhstan supplies oil to Germany via the northern spur of Druzhba, which traverses Poland.

The market is also awaiting the U.S. Energy Information Administration weekly oil report. The report for the week ending April 10 showed U.S. crude stocks, gasoline and distillate inventories fell as imports declined and exports rose.

“A continued rise in U.S. crude oil and product exports would confirm the scarce availability of oil in the Far East and Europe and could provide renewed support to oil prices,” PVM’s Varga said.