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(Bloomberg) — Oil edged higher as traders parsed discordant signals on the prospects of a US-Iran peace deal.
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West Texas Intermediate rose 1.7% to settle near $94 a barrel, while Brent closed at $96. Prices climbed Tuesday on headlines from Iranian news agencies that cast doubt on progress in the talks, as well as an Agence France-Presse report that Hezbollah won’t accept a partial ceasefire with Israel. A truce in Lebanon had been cited by Iranian officials as a condition for a broader peace agreement.
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The barrage of price-supportive headlines reversed early session losses that were triggered by de-escalatory comments from Washington. President Donald Trump said a memorandum of understanding with Iran to reopen the Strait of Hormuz could happen over the next week, according to ABC News, which cited a telephone conversation with Trump.
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The primary focus for the oil market remains the Strait of Hormuz, which handled about one-fifth of global oil and liquefied natural gas flows before the war began. Visible commercial traffic through the waterway remains limited as the renewed strains in US-Iran diplomacy add to shipping uncertainty.
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“If the US or Iran’s stance leads to a more prolonged closure of the Strait, OECD stocks could reach a critical threshold by mid-September, triggering a price spike towards $150 per barrel,” said Bridget Payne, head of energy forecasting at Oxford Economics, referring to crude stockpiles.
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The lack of clarity over the potential extension of the current ceasefire — and the future of flows through the Strait of Hormuz — has buffeted oil prices, which fell last month on optimism that a deal could be reached.
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Adding to the confusion, Trump and Israeli Prime Minister Benjamin Netanyahu earlier offered differing accounts of a call about the fighting in Lebanon. A US-brokered ceasefire between Tel Aviv and Iran-backed Hezbollah should be extended from Beirut to include the entirety of Lebanese territories, with more negotiations taking place on Tuesday and Wednesday, the Lebanese presidency said in a post.
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Price volatility has forced dealers to scale back their risk exposure, pushing open interest in the global benchmark to the lowest since August.
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“Clients are tired,” Goldman Sachs Group Inc. Co-Head of Global Commodities Research Daan Struyven told Bloomberg TV. “It’s a challenging trading environment with headlines moving prices up and down. Positioning in oil markets is significantly more limited than at the start.”
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Commodities are in a “super-squeeze” that will worsen if Hormuz remains effectively shut, analysts at HSBC Holdings Plc said in a report.
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—With assistance from Charlie Zhu, Sarah Chen and Bill Lehane.
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