Oil ticks up after selloff as talks to end US-Iran war remain uncertain

Oil prices rebounded slightly on Tuesday, after plunging ​in the previous session, on concerns Middle Eastern supply remains at risk as a diplomatic resolution to ‌the US-Iran war that has disrupted shipments still seems unlikely.

Front-month Brent futures rose $0.62, or 0.7%, to $84.39 a barrel as of 0055 GMT after dropping 7% in the previous session to a three-week low.

US West Texas Intermediate (WTI) crude was $0.61, or 0.7% higher at $80.95 after falling over 5% ​in the previous session to its lowest in nearly a week.

Prices dropped after US President Donald Trump said ​on Sunday he was holding off on new attacks on Iran pending ongoing talks to end their ⁠war and settle claims over control of the key Strait of Hormuz. The waterway connects Gulf oil producers to global ​markets and before the conflict energy exports equal to about 20% of total consumption transited daily.

However, on Monday, Iran’s Foreign ​Ministry spokesman Esmail Baghaei rejected Trump’s claim, saying no negotiations with the US were taking place and no meetings were scheduled.

“Some of the sting has been taken out of oil prices … with Trump pausing strikes on Iran and touting a return to negotiations (though) the move lower remains ​fragile – oil could just as easily rebound higher if missiles start flying again or if tankers around the Strait of ​Hormuz come under fire once more,” said Tim Waterer, chief market analyst at KCM Trade.

The dispute over the Strait of Hormuz remains ‌a central ⁠point of contention. Washington says the memorandum of understanding agreed in June required Iran to open the waterway, while Tehran argues the text explicitly preserved its authority.

Analysts at Barclays said in the week ended July 31 crude oil and refined product net exports through the strait averaged 4.2 million barrels per day, compared with 3.2 million bpd the previous week.

In the ​Red Sea, six Saudi-flagged supertankers changed course ​in the Gulf of ⁠Aden recently and are heading to southern Africa, while two tankers laden with Saudi oil crossed the Bab el-Mandeb Strait, shipping data showed on Monday.

Traffic in the Strait of Hormuz ​between Iran and Oman also slowed following reports of vessel attacks, the data showed.

Hormuz remains ​dangerous for vessels. ⁠The United Kingdom Maritime Trade Operations on Tuesday said it received a report of an incident 20 nautical miles (37 km) northeast of Oman’s Al Khasab, after a cargo vessel broadcast over VHF channel 16 that it had been hit by an unknown projectile.

“While ⁠the fighting ​between Saudi Arabia and the Houthis has not completely halted energy ​flows, it has forced longer voyage times, higher insurance costs and occasional diversions. With the Strait of Hormuz, it keeps a dual-chokepoint risk in the ​market that prevents oil from fully unwinding its geopolitical premium,” Waterer said.