By Mohi Narayan and Helen Clark
NEW DELHI, Aug 7 (Reuters) – Oil extended gains on Friday amid further concerns around the opening of the Strait of Hormuz as Iran, working with Oman, suggested banning vessels deemed hostile from the strait and heavily fining those which violated the proposed rules.
Brent crude futures rose 80 cents, or 0.97%, to $83.29 a barrel by 0303 GMT. U.S. West Texas Intermediate futures rose 64 cents, or 0.83%, to $77.93.
Oil futures settled up at over $3 a barrel on Thursday as Iran reviewed a bill to ban U.S. and Israeli vessels from the Strait of Hormuz where roughly a fifth of the world’s oil and liquefied natural gas transmitted before the war began at the end of February.
Prices fell earlier in the week as a possible solution to the ongoing conflict looked more likely but benchmark Brent breached $80 on Thursday after falling below that for the first time since July 13. Both benchmarks were headed for a weekly loss of about 8%.
Analysts said the events that have unfolded this week signalled that the hostilities between Iran and the U.S. are not yet over.
“The proximate trigger is more specific, it’s (oil prices) reacting to Iran’s published draft plan for Hormuz transit conditions, which would ban U.S. and Israeli vessels and require other ‘hostile’ countries to pay compensation before passage,” said Lin Ye, vice president of commodities market – oil at consultancy Rystad Energy.
“That’s not the market pricing in a bad deal, it’s pricing in confirmation that whatever emerges is a managed/conditional corridor, not a restoration of normal flow,” Ye added.
An Iranian lawmaker said a parliamentary committee is reviewing a preliminary bill to ban U.S., Israeli and other vessels deemed hostile from the Strait of Hormuz, and fine violators of the proposed restrictions up to 20% of cargo value, according to Fars news agency.
Iran is seeking fees of between 5% and 7% of the price of cargoes from ships using the strait, according to the senior Iranian official. Oman is discussing fees of around 3%, while Washington wants no fees at all.
Four industry sources have said the proposed deal is not easily workable due to U.S. sanctions and restrictive insurance clauses on any payments.
“This week’s signals on a potential Iran-Oman transit deal have driven a roller-coaster ride in market sentiment but as of now, (it is) left it in the dark as to what needs to happen for the agreement to be clinched,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.
Meanwhile, Yemen’s Houthis said they carried out missile and drone attacks on “Saudi deployments” in Marib and Hadramout in Yemen on Thursday.
U.S. President Donald Trump on Thursday told reporters that he believed the war would be over soon.
(Reporting by Mohi Narayan in New Delhi and Helen Clark in Perth; Editing by Stephen Coates)
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