Oil gains on pending Iran-Oman Hormuz deal

Oil prices experienced an increase on Friday as investors reviewed the prospects of a forthcoming agreement between Iran and Oman aimed at regulating transit through the Strait of Hormuz. Brent crude futures climbed 93 cents, or 1.14 percent, to reach $83.42 a barrel, while West Texas Intermediate futures rose 96 cents, or 1.24 percent, to $78.25.

Oil futures had previously surged more than $3 a barrel higher on Thursday after Iran contemplated enacting a ban on US and Israeli vessels from utilizing the Strait of Hormuz, a crucial route through which approximately one-fifth of the world's oil and liquefied natural gas typically passes. The decline in oil prices earlier in the week was attributed to heightened optimism regarding a potential resolution to the conflict, with both benchmark prices expected to suffer a weekly loss surpassing 9 percent.

Andrew Lipow, president of Lipow Oil Associates, explained that the market is endeavoring to ascertain whether an Iran-Oman agreement would permit a US-flagged vessel to traverse the Strait of Hormuz, as well as whether it would allow a US-owned vessel to pass through or a vessel bound for a US port. Both Iran and Oman reportedly concur on the route ships will take through the strait.

The oil market is also assessing the duration required to conclude the five-month-long war between the US, Israel, and Iran. Lipow noted that the longer the supply disruption persists, the more rapidly commercial reserves will be depleted. Analysts further pointed out that recent developments suggest the hostilities between Iran and the US remain unresolved.

Iran is reportedly seeking fees ranging from 5% to 7% of the price of cargoes from ships utilizing the strait, according to a senior Iranian official. Oman is engaged in discussions about approximately 3% fees, while Washington remains opposed to any fees. Four industry sources have indicated that the proposed deal faces significant challenges due to US sanctions and restrictive insurance clauses regarding any payments.