-- West Texas Intermediate (WTI) closed higher on Tuesday amid an uncertain outlook for talks between Iran and the United States.
WTI crude oil for May delivery closed up US$2.52 to settle at US$92.13 per barrel, while June Brent oil was last seen US$3.11 to US$98.59.
The drop comes amid expectations that talks between the two countries will reach a deal to end hostilities as a two-week ceasefire agreement is set to expire tomorrow. However Iran has not publicly confirmed it will send negotiators to Pakistan to meet with the United States, though the Wall Street Journal reported Iran has told mediators it will send a team to the talks.
Prices surged on Monday as Iran on Friday briefly opened and then again closed the Strait of Hormuz as the United States continued to block Iranian ports and disabled and boarded an Iranian cargo ship. The closure of the Strait is blocking oil exports from the Persian Gulf nations that supplied 20% of daily oil demand.
"Potential talks with the US in Islamabad ahead of the ceasefire's expiry on Wednesday follows a weekend marked by renewed tensions and conflicting signals, leaving the Strait of Hormuz effectively closed for now. The limited number of vessels managing to transit has done little to ease the ongoing tightening of the global energy market, which is increasingly short of prompt supplies - supporting elevated prices across diesel, jet fuel, fertilisers, and other key commodities," Saxo Bank noted.
The closure of the Strait has forced up spot prices for oil as Asian nations fight for immediately available supply while raising concerns high oil prices, as well as the price of refined products, LNG and other commodities supplied by Persian Gulf countries, will hike inflation and force higher interest rates.