Oil prices were up on Thursday amid scepticism that forthcoming peace talks between the US and Iran would resolve disruptions to Middle Eastern energy supplies caused by the ongoing war.
Brent crude futures climbed $4.46 or 4.7 per cent to $99.39 per barrel, and the US West Texas Intermediate (WTI) crude futures gained $3.40 or 3.7 per cent to settle at $94.69 a barrel.
The US-Israeli war with Iran stands as the largest-ever disruption of global oil and gas supplies due to Iran’s interruption of traffic through the Strait of Hormuz, which typically carries about 20 per cent of the world’s oil and liquefied natural gas flows.
Reuters reported that American and Iranian negotiators have scaled back their expectations for a comprehensive peace deal and are instead seeking a temporary memorandum to prevent a return to conflict.
Iran, which has faced crippling US sanctions for years, wants a memorandum to include unfreezing some Iranian funds in return for allowing more ships through the strait. The US is demanding a halt to Iran’s nuclear enrichment work for 20 years, while Iran wants to limit it to three to five years. It also wants a timetable for lifting the sanctions imposed on the country by the United Nations, the US and the European Union (EU).
US President Donald Trump later said the Middle East nation is very close to a deal with Iran, an assertion he has previously made.
With the US blockade of Iranian ports announced after the collapse of peace talks over the weekend, the disruption could increase, although some US-sanctioned tankers have made it through.
Oil benchmarks barely reacted to his remarks, just as the markets also did not react to his announcement of a 10-day ceasefire between Israel and Lebanon in their related conflict, starting Thursday.
The supply disruptions are straining global oil inventories, particularly for jet fuel in parts of Asia and Africa. For instance, Nigerian airlines threatened to suspend all flight operations from April 20, unless there is an easing of crippling jet fuel prices, which they accused the country’s fuel marketers of artificially inflating.
The International Monetary Fund (IMF) has downgraded global growth and warns of a potential recession if the Iran war drags on.