(Feb 24): Oil rose as investors weighed the odds of an Iranian nuclear deal, with US President Donald Trump saying he prefers a diplomatic solution but warning of consequences if an agreement is not reached.
Brent traded near US$72 a barrel after closing slightly lower on Monday (Feb 23) and West Texas Intermediate was near US$67. Trump said in a social media post it will be a “very bad day” for Iran if a deal is not agreed and pushed back on reports the Pentagon was worried an extended military campaign may prove difficult.
Negotiations on a nuclear deal are set to resume on Thursday in Geneva with Trump’s special envoy Steve Witkoff and son-in-law Jared Kushner expected to meet again with Iranian Foreign Minister Abbas Araghchi.
Concerns about the fallout from a US strike on Iran have helped to drive futures higher this year despite expectations of a global glut. American military forces have massed in the Middle East and the State Department on Monday ordered the evacuation of non-emergency personnel at its embassy in Beirut.
“Oil markets are in a holding pattern pending updates on the Iran situation, with a healthy dose of scepticism being placed on any de-escalatory rhetoric,” said Saul Kavonic, senior energy analyst at MST Marquee. The US military build-up has added a risk premium of around US$10 per barrel to prices, he said.
See also: Huge supertanker bet keeps growing with US Gulf locked up
Any disruption to shipping through the Strait of Hormuz by Tehran remains the primary focus for the oil market should the US go ahead with a military strike. Tankers carrying crude and liquefied natural gas transit through the narrow waterway daily to deliver cargoes to customers worldwide.
A recent closure of parts of Hormuz for Iranian military drills has contributed to higher rates for oil supertankers. Hiring a very large crude carrier for a year now costs more than US$92,000 a day on average, according to Clarkson Research Services Ltd, the highest in data going back to 1988.
Prices:
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- Brent for April settlement rose 0.5% to US$71.83 a barrel at 1.04pm in Singapore.
- WTI for April delivery was 0.5% higher at US$66.65 a barrel.
Uploaded by Arion Yeow
