Oil steadies as hopes of renewed US-Iran negotiations offset Houthi threat

Oil prices were steady on Monday, pulling back from earlier highs as price pressure from hopes of renewed U.S.-Iran negotiations was countered by Yemen’s Houthis declaring a naval blockade against Saudi Arabia.

Benchmark prices had earlier touched more than one-month highs on concern over disruption to shipments through the Strait of Hormuz.

Brent crude futures were up 18 cents, or 0.2%, at $88.28 a barrel by 1222 GMT after hitting $91.42 for their highest since June 11.

U.S. West Texas Intermediate crude was down 34 cents, or 0.4%, at $82.15 after touching its loftiest level since June 12 at $85.39.

Mediators have passed Iran a proposal to de-escalate the war with the U.S., suggesting a 10-day ceasefire to find ways to revive an interim deal reached last month, a senior Iranian official told Reuters on Monday.

Efforts to restore dialogue between the U.S. and Iran weighed on prices, said Crispus Nyaga, research analyst at Empire FX.

Drop in tanker traffic from Gulf

However, traffic through the Strait of Hormuz has thinned sharply, with only a handful of ships making the passage, he added.

Prices had earlier extended last week’s hefty gains, driven by recent hostilities between the U.S. and Iran that have restricted oil shipments through the strait.

The Middle East conflict escalated over the weekend, with the U.S. conducting a ninth straight night of attacks against Iran while U.S. allies Kuwait and Bahrain reported more Iranian strikes.

The Islamic Revolutionary Guard Corps said on Monday that two oil tankers had been immobilised after explosions as they attempted to transit what it described as an unsafe southern route through the Strait of Hormuz, alleging they had been encouraged by the U.S. military to use that passage.

Reuters was unable to obtain immediate verification of events.

“The supply narrative has become more bearish. The anticipated recovery in shipping has effectively stalled, with Strait of Hormuz transit volumes falling to single digits,” ANZ analysts said in a note.

Four vessels made the transit through the Strait of Hormuz on Sunday, down from eight the previous day, LSEG data showed. At least three oil products tankers and one very large crude carrier have entered the strait since Friday to load oil, the data showed.

Gulf countries boosted crude oil and condensate exports in the first half of July to their highest since before the Iran war began in late February, shipping data showed, though flows through the Strait of Hormuz are slowing as fighting escalates.

The collapse of a U.S.-Iran truce has reignited concerns over energy supplies moving through the strait. Before the Iran war, about 20% of global oil supplies flowed through the waterway. Iran has also pressed the Houthis to close the Red Sea route if the U.S. attacks Iranian power infrastructure.