Brent Holds Near $83 as Hormuz Deal Hopes Meet Supply Risks

Brent crude held near $83 a barrel as diplomatic hopes for a Strait of Hormuz reopening collided with fresh threats to Gulf shipping, keeping WTI and natural gas in focus.

"Markets are likely to remain volatile until incoming economic data provides clearer direction on interest rates," said David Stritch, a strategist at Caxton.

Brent traded at $84.46 a barrel, up 1.09 percent, while WTI gained 0.78 percent to $78.79, according to Reuters data. Both benchmarks remain well below the $102 high reached two weeks earlier, after oil fell more than 7 percent last week on expectations that Iran and Oman could reach a transit agreement. US commercial crude inventories rose 2.5 million barrels to 407 million barrels last week, though they stayed 6 percent below the five-year average, EIA data show.

The stakes are high: the Strait of Hormuz carries about 21 million barrels a day, roughly one-fifth of global petroleum consumption. If Iran enforces a draft bill fining transit violators up to 20 percent of a ship's cargo value, the risk premium could persist; a confirmed Iran-Oman deal would likely strip it out and send Brent back toward $70-80.

Hormuz Risk Premium Holds as Transit Talks Stall

Iran has proposed but not yet enforced restrictions barring US and Israeli vessels from the strait, with fines of up to 20 percent of a ship's cargo value, according to a draft bill reported by Crux Investor. Iranian Deputy Foreign Minister Kazem Gharibabadi said an agreement with Oman on future shipping arrangements was nearing completion, yet no deal has been announced. The United Arab Emirates' state-owned ADNOC said 15 of its vessels had been attacked in the strait since the conflict began, keeping supply concerns alive.

The unresolved transit talks have kept the geopolitical premium embedded in crude prices even as diplomatic channels reopen. US President Donald Trump said talks with Iran had resumed and were making progress, but Tehran has rejected the proposal, leaving the timeline for any reopening unclear. The last time the strait faced a comparable threat, oil prices spiked sharply before retreating once shipping resumed, showing how quickly the premium can unwind.

US Supply Growth Caps the Rally

US crude production reached 13.804 million barrels a day, with the four-week average up 3.8 percent from a year earlier, adding supply that offsets some of the geopolitical risk. US imports of Saudi crude fell to zero in July, the first such occurrence since 1985, tightening a key source of supply to American refiners. Refinery utilization held near 96.5 percent of operable capacity, while distillate inventories ran 12 percent below their five-year average, EIA data show.

Natural gas has built short-term momentum as traders hedge against supply disruptions, though the fuel's trajectory remains tied to the same geopolitical variables driving crude. OPEC+ producers agreed to increase collective output by 188,000 barrels a day from September as part of the group's gradual rollback of voluntary cuts introduced in 2023, adding to expectations of a better-supplied market.

The US Strategic Petroleum Reserve has fallen to about 304.8 million barrels, its lowest level since 1983, after more than 110 million barrels were withdrawn since late March as part of the largest coordinated emergency release in IEA history. If the remaining barrels under the 172-million-barrel program are drawn down, the reserve could fall to around 243 million barrels, leaving limited cushion for a future disruption.

For traders, the path forward hinges on whether Iran and Oman finalize a transit agreement. A confirmed deal would likely remove the near-term risk premium and shift attention to underlying supply conditions, where rising US output and OPEC+ increases point to looser balances. Absent a deal, Brent could hold near $83 while the market prices in the possibility of a sustained closure.

This article is for informational purposes only and does not constitute investment advice.