NEW YORK: Oil prices swung between gains and losses in volatile trading on Thursday, ultimately settling lower after a report said Saudi Arabia and Kuwait lifted restrictions on the United States’ use of its airspace and military bases, allowing the US to restart operations to escort commercial ships through the Strait of Hormuz as early as this week.
Brent crude futures settled down 1.2 percent or USD1.21 at USD100.06 a barrel, while US West Texas Intermediate crude futures settled down 0.28 percent or 27 cents at USD94.81. Both benchmarks had earlier declined by as much as USD5 a barrel on optimism that Washington and Tehran were moving toward a limited, temporary agreement to halt their conflict.
The global benchmark climbed more than USD1 while WTI jumped $2 in post-settlement trading after Iran’s Fars news agency said that several sounds resembling explosions were heard near Bandar Abbas city in Iran.
READ MORE: Oil turns positive on report Iran rejects US proposal for Strait of Hormuz
On Thursday, the Wall Street Journal said Saudi Arabia and Kuwait had lifted restrictions on the US military’s use of its airspace and military bases, citing US and Saudi officials, and that the Trump administration was looking to restart ‘Project Freedom’, its operation to guide vessels through the vital Strait of Hormuz waterway this week.
The US and Iran are edging toward a limited, temporary agreement to halt their war, sources and officials said on Thursday, with a draft framework that would stop the fighting but leave the most contentious issues unresolved and center on a short-term memorandum rather than a comprehensive peace deal.
SEB Research analyst Ole Hvalbye said a confirmed deal would probably take Brent back into the USD80-$90 price range quickly but a breakdown in talks or a Trump pivot back to strikes, however, would immediately push prices north of USD120 a barrel.
While a signed memorandum of understanding might reduce the risk premium in the paper market, it would not have much immediate impact on the high premiums for physical crudes, he said, adding that it would take weeks or months for the market to normalise after an agreement.
On the supply front, Iran appears to have cut back oil production by 400,000 barrels per day and is likely to reduce it further as its storage units fill, US Energy Secretary Chris Wright said in an interview with Fox News on Thursday.
A Chinese-owned oil products tanker was attacked near the Strait of Hormuz on Monday, Chinese media outlet Caixin reported, marking the first time a Chinese oil vessel has been attacked.
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