Oil loses steam as hopes of a diplomatic breakthrough grow

Oil has retreated this week amid growing optimism that high-stakes diplomacy at the United Nations General Assembly (UNGA) summit could help bridge the diplomatic divide between Washington and Tehran.

IMAGE: Flags of Iran and the US. Getty Images

Reports that Tehran may lift its Hormuz blockade if Washington dials back its economic and military campaign has put further downward pressure on oil.

Seven key conditions for Iran to return to the negotiation table has already reached Washington's desk, Iran’s National Security Council secretary Mohsen Rezaei said earlier this week. These conditions include the end of the US blockade of Iranian ports and the immediate release of frozen Iranian assets.

Iran will restore commercial navigation through the Strait of Hormuz within a week if Washington eases its pressure on the OPEC member, Reuters reported, citing a senior Iranian government official.

So far, the US Central Command (CENTCOM) has redirected 110 commercial vessels, disabled more than three, and boarded two to prevent ships from entering or departing Iranian ports, it said.

Additionally, US President Donald Trump told reporters that US officials ‌had a “very good” three-hour meeting with Iranian representatives, at the UNGA summit in New York earlier today.

“They had a very good meeting, a very productive meeting,” Trump said.

His remarks have raised “hopes for further diplomatic progress and reducing fears of prolonged supply disruptions in the region,” two analysts from ING Bank noted.

Despite the positive signals, a direct meeting between Trump and Iranian President Masoud Pezeshkian remains off the table.

That stance stands in contrast to Trump’s “probably open” offer to sit down with his Iranian counterpart on the sidelines of the UNGA summit.

Threat to commercial navigation remains

The United Kingdom Maritime Trade Operations (UKMTO) agency has reported another incident involving an LPG tanker attempting to transit the Strait of Hormuz outbound earlier this week.

The vessel was hit by debris from unknown projectiles, the UKMTO reported.

Another tanker, conducting an inbound transit into the strait, was struck by an unknown projectile, the UKMTO reported. “Two crew have sustained minor injuries,” the agency said.

As of yesterday, only 12 vessels attempted to transit the strait – eight inbound and four outbound – market intelligence provider Windward reported. Six of these vessels moved in dark mode, the data showed.

Although yesterday’s transit volume was higher than the six crossings noted on Friday, vessel traffic remains well below the pre-war average of 140 daily transits.

By Aparupa Mazumder

Please get in touch with comments or additional info to news@engine.online