Oil steadies near one-week highs as US-Iran peace deal hopes dim

Oil prices stabilized near their highest levels in a week on Tuesday as hopes of a US-Iran peace deal faded, after President Donald Trump insisted on compensation for the damage his country has suffered. On Tuesday morning, Brent crude futures were flat at $87.81 per barrel, while West Texas Intermediate crude futures remained steady at $82.20 per barrel.

On Monday, both benchmarks climbed more than 5% to their highest point since July 31, following Trump's response to Iran's terms for a peace deal. Trump demanded Iran pay compensation for casualties in wars, attacks, and protests, which could complicate the reopening of the Strait of Hormuz.

Tim Waterer, chief market analyst at KCM Trade, noted that there appears to be a significant gap between the positions of the US and Iran regarding any potential agreement. As a result, some of the optimism that had built up last week has been eroded, giving oil prices a cautious tone. Meanwhile, Saudi Aramco has delayed the restart of its 400,000-barrel-per-day Jazan refinery until August 30, following two attacks on the plant claimed by the Houthis on Sunday.

The threat of disruptions to the Strait of Hormuz and Bab el-Mandeb remains high, as the insurance costs are elevated and longer shipping routes are necessary due to the risks. According to analysts at Barclays, crude oil and refined product net exports through the Strait of Hormuz averaged 3 million barrels per day in the week ending August 7, down from 4.4 million bpd in the previous week.

In a recent note, analysts pointed out that Iraq has increased the September official selling price (OSP) for Basra Medium crude to Asia by $2.50, making it $4 per barrel cheaper than the average of Oman/Dubai quotes.