Oil pared its early gains after the United States and Iran agreed to halt attacks, following weekend tensions that saw a giant oil tanker hit near the Strait of Hormuz.
Brent crude traded near $72 a barrel after jumping as much as 1.9% in early trading, while West Texas Intermediate crude remained below $70.
Both sides will refrain from escalating for the time being, and ships can move freely before peace talks resume this week, according to a U.S. official who spoke on condition of anonymity.
Oil has erased almost all of its gains since the US and Israel first attacked Iran at the end of February. Before the conflict, roughly one-fifth of the world's crude oil and liquefied natural gas passed through the Strait of Hormuz, and the resumption of negotiations offers the possibility of a more lasting peace agreement leading to the full reopening of this vital waterway.
Haris Khurshid, chief investment officer at Chicago-based Karobaar Capital, said: “The market is increasingly comfortable viewing these moves as tactical rather than structural. Until something fundamentally changes, traders will be happy to sell both rallies and troughs.”
Hormuz pressures renewed despite resumption of talks
Tehran targeted the tanker Kiko over the weekend. The very large crude carrier had loaded about two million barrels of oil in Qatar and sent its last signal indicating its location off the UAE port of Fujairah in the Gulf of Oman.
Oil and natural gas shipments through the Strait of Hormuz, which had rebounded following a temporary agreement between the two sides, have declined again after the latest escalation of tensions. Ship owners are likely to remain wary of transiting the chokepoint, while hundreds of vessels remain stranded in the waters of the Arabian Gulf.
At the end of the week, a helicopter operated by Saudi Aramco crashed in Ras Tanura, the heart of Saudi Arabia's energy sector, near the Arabian Gulf coast, according to the Saudi Press Agency, which did not provide details about the cause. It was not immediately clear whether the incident, which occurred on Sunday, affected any energy facilities.
Elsewhere, Russian President Vladimir Putin acknowledged that the country is facing fuel supply problems, including long lines at gas stations. He confirmed that a complete ban on diesel exports is among the measures being considered to alleviate the shortages.
In the latest trading, Brent crude futures for August delivery, which expire on Tuesday, rose 0.2% to $72.12 a barrel by 7:15 a.m. in London, while the more actively traded September contract climbed 0.5% to $72.98 a barrel. West Texas Intermediate crude futures for August delivery gained 0.8% to trade at $69.76 a barrel.
