Deal fatigue – the growing awareness among analysts that a peace agreement between the U.S. and Iran will likely never occur – continued to permeate oil trading on Monday, with Brent settling up 2.5 percent at $90.87 per barrel.
West Texas Intermediate also settled up 2.5 percent at $84.50 per barrel after U.S. president Donald Trump said in the Oval Office as the 60-day ceasefire between the two countries expired, “They want to make a deal, but they’re not going to make the kind of a deal that I feel is necessary.”
For its part, Iran ruled out extending diplomatic talks, according to state news agency Tasnim, and a senior Iranian official told media on Monday that the country would shift to an offensive posture if talks with the U.S. failed.
Meanwhile, both Washington and Tehran reiterated their claims of control over the Strait of Hormuz, which on Sunday saw only three ships make the transit of the waterway compared to 10 the previous day (last week, traffic was down 19.5 percent from the already-depressed traffic of the previous week, due to Iranian attacks on ships and oil infrastructure.
Jason Stephens, founder of Evertern Wealth, said of the relentless back and forth between the U.S. and Iran, “I think a lot of people have just turned a blind eye to it; we think that there’s more bias to the downside in oil prices than there is the risk to the upside at this point in the game.”
In other war-related oil news on Monday, sources familiar with the project told media that plans to build a pipeline and use it to ship Iraq crude to Syria’s Mediterranean coast and bypass the Strait of Hormuz is at least four years and $15 billion in investments away.
Still, Syria and Iraq have started negotiations to finalize the contract and are also in discussions with companies that will invest in the pipeline, with the U.S. stating it will make the Hormuz “irrelevant” within a few years.
Also on Monday, The Asahi Shimbun on Monday reported that ss much as 90 percent of Japanese companies said in a June survey by Teikoku Databank Ltd. that rising energy prices were having a negative impact on their operations.
Japan has been somewhat successful in easing its oil crisis by diversifying purchases and releasing stocks from strategic reserves, but soaring oil import bills are negatively affecting economic activity.