Summary
- Iran considers attending peace talks in Pakistan
- Another month of Hormuz disruption could push prices towards $110 a barrel in Q2, Citi says
- Market awaits US EIA data on Wednesday
- Russia to stop exports from Kazakhastan to Germany
(Reuters) – Oil prices fell on Tuesday, reversing the previous session’s gains, on expectations that peace talks between the U.S. and Iran will take place this week and lead to more supply flowing from the key Middle East producing region.
Brent crude futures were down 69 cents to $94.79 a barrel at 0955 GMT.
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U.S. West Texas Intermediate (WTI) for May was down $1.12, or 1.3%, to $88.49. This contract expires on Tuesday and the more-active June one fell 16 cents to $90.27.
Both benchmarks surged on Monday, with Brent up 5.6% and WTI up 6.9%, after Iran again shut the Strait of Hormuz and the U.S. seized an Iranian cargo ship as part of its ports blockade.
Investors are focused on whether potential talks this week might result in an extension of the existing ceasefire or a final agreement, although further disruptions to oil flows remain likely.
“The market (is) inclined to believe that, before the expiration of the ceasefire tomorrow, at least an extension will be reached between the U.S. and Iran, and that the Israeli–Lebanese talks scheduled for Thursday will not disappoint either,” said analyst Tamas Varga at PVM Oil Associates.
Underscoring the uncertainty, an Iranian official said that no decision had been made to attend talks, and Iranian Foreign Minister Abbas Araqchi said “continued violations of the ceasefire” by the U.S. were a hindrance to further negotiations.
Shipping through the Strait of Hormuz, a corridor for about a fifth of the world’s oil supply, remained limited on Monday and EU Energy Commissioner Dan Jorgensen said it would be a difficult summer for Europe due to fuel shortages even in a best-case scenario.
If disruptions persist for another month, total losses could rise to about 1.3 billion barrels, with prices likely near $110 in the second quarter, Citi said.
Meanwhile, firefighters were still tackling a blaze at Russia’s Black Sea port of Tuapse on Tuesday, more than 24 hours after a Ukrainian drone attack, local authorities said.
One of Russia’s major southern ports, Tuapse is an oil product export hub and home to a major oil refinery of the same name owned by Rosneft.
Russia is set to stop oil exports from Kazakhstan to Germany via the Druzhba pipeline starting from May 1, three industry sources told Reuters. Kazakhstan supplies oil to Germany via the northern spur of Druzhba, which traverses Poland.
The market is also awaiting the U.S. Energy Information Administration weekly oil report. The report for the week ending April 10 showed U.S. crude stocks, gasoline and distillate inventories fell as imports declined and exports rose.
“A continued rise in U.S. crude oil and product exports would confirm the scarce availability of oil in the Far East and Europe and could provide renewed support to oil prices,” PVM’s Varga added.
Reporting by Seher Dareen in London, Anmol Choubey in Bengaluru and Emily Chow in Singapore. Editing by Alexander Smith and Mark Potter
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