Oil turns negative as source says Iran-US peace talks likely

LONDON: Oil turned negative on Friday after a Pakistani government source said Iranian Foreign Minister Abbas Araqchi was expected to arrive in Islamabad on Friday night with a small team and peace talks with the U.S. were likely to take place.

Earlier in the session, crude was up more than 2% on concerns of a renewed military escalation in the region after Iran released footage of commandos boarding a cargo ship in the Strait of Hormuz, and a lack of progress in re-opening the key waterway.

However, speculation that diplomacy could resume prompted prices to pare gains, analysts said.

By 1203 GMT, Brent crude futures were down 79 cents, or 0.8%, at $104.28, and U.S. West Texas Intermediate futures fell 95 cents or 1% to $94.90.

“Whilst the fundamental backdrop remains supportive, traders are liquidating length ahead of an unusually unpredictable weekend and will readjust their positions Sunday night based on Iranian developments,” said Tamas Varga of oil broker PVM.

Navigation through the strait, which before the war carried about a fifth of global oil output, remains effectively blocked. Iran’s capture of two cargo ships highlighted Washington’s difficulties in trying to control the passage.

For the week, Brent is up 15% and WTI 13%, the second-largest weekly gains since the war began.

On Wednesday, U.S. President Donald Trump said Iran may have loaded up its weaponry “a little bit” during a two-week ceasefire, but added that the U.S. military could eliminate it in a single day. On Wednesday, he said he would indefinitely extend the ceasefire to allow for further peace talks.

Haitong Futures said in a report that if peace talks fail to make progress by the end of April and fighting resumes, oil prices could climb to new highs for the year.

“There’s set to be fresh financial pain ahead as key shipments from the region remain blocked,” said Susannah Streeter, chief investment strategist at UK investment service Wealth Club. “That is set to keep costs elevated for a vast array of commodities.”