Oil prices rose 1% on Tuesday, extending gains from the previous session, as efforts to end the US-Iran war appear stalled, with the crucial Strait of Hormuz waterway still mainly shut, keeping energy supplies from the key Middle East producing region out of the reach of global buyers.
US President Donald Trump is unhappy with the latest Iranian proposal aimed at ending the war, a US official said on Monday. Iranian sources disclosed on Monday that Tehran's proposal avoided addressing its nuclear program until hostilities cease and Gulf shipping disputes are resolved.
Trump's displeasure with the Iranian offer leaves the conflict deadlocked, with Iran shutting shipping flows through the Strait of Hormuz, which typically carries supply equal to about 20% of global oil and gas consumption, and the US keeping in place its blockade of Iranian ports.
Brent crude futures for June climbed $1.41, or 1.3%, to $109.64 a barrel as of 0400 GMT, after gaining 2.8% in the previous session to its highest close since April 7. The contract is up for a seventh day.
US West Texas Intermediate (WTI) crude for June rose $1.27, or 1.3%, to $97.64 a barrel, after gaining 2.1% in the previous session.
An earlier round of negotiations between the US and Iran collapsed last week following failed face-to-face talks.
"Talks around ‘peace’ still look largely superficial and lack concrete evidence of de-escalation. Despite the rhetoric, vessel movement through the Strait of Hormuz remains curtailed, and that prolonged disruption is what's keeping oil risk premiums elevated," said Phillip Nova's senior market analyst Priyanka Sachdeva.
"In the near term, oil markets are less about macro demand and more about diplomatic gridlock. Until diplomacy translates into actual barrel flows, not just statements, oil markets will remain volatile with an upward bias through May," she added.
Ship-tracking data revealed significant disruptions in the region, with six Iranian oil tankers forced to turn back due to the US blockade.
Prior to the US-Israeli war on Iran, which began on February 28, between 125 and 140 vessels transited the strait daily.
The market is also looking ahead to private and government US inventory data for later this week.
Analysts polled by Reuters are expecting US crude inventories to have risen by 300,000 barrels in the last week, with official data from the US Energy Information Administration set for release on Wednesday.
