Oil rose on Tuesday as traders' nervousness about a lack of progress on peace talks between the United States and Iran offset any price impact of a slight recovery in shipping through the Strait of Hormuz.
Brent crude futures LCOc1 gained $1.02, or 1.42%, to $73.01 a barrel, while U.S. West Texas Intermediate crude CLc1 rose 93 cents, or 1.36%, to $69.48 a barrel as of 0748 GMT.
"The deal is by no means signed yet, so something can still go wrong and any comments from either side could raise concern which is helping to underpin prices and it's basically removing some of the recent intense focus on an increasingly oversupplied market," Saxo Bank analyst Ole Hansen said.
Talks to reach a final deal between Tehran and Washington will not take place if U.S. threats continue, Iran's foreign minister said on Tuesday, following U.S. President Donald Trump's threat to "finish the job" unless a deal is done.
"So if there's any further escalation, then $75 would be the natural level to look at next ahead of $80," Hansen added.
Investors are monitoring talks between the U.S. and Iran and their implications for shipping through the Strait of Hormuz, which prior to the beginning of the Iran war at the end of February carried one-fifth of the world’s daily supply of oil and liquefied natural gas.
On Monday, Iran's Revolutionary Guards fired at least two missiles at commercial ships transiting the Strait, Axios reported, citing two U.S. officials. The commercial ships suffered significant damage, the report said, adding there were no casualties.
On Tuesday, Japanese-owned supertankers carrying Saudi Arabian crude headed to the Strait of Hormuz to exit the Gulf, shipping data showed, joining a fleet of previously stranded vessels that left a day earlier.
Oil flows are nevertheless recovering more slowly than expected, ANZ analysts said in a note.
"The initial rebound in tanker transits through the Strait of Hormuz has stalled, with vessel crossings remaining in single digits and no sustained recovery evident," they said.
Saudi Arabia is considering expanding the capacity of its crude oil pipeline to the western Red Sea coast, five sources close to the matter said, which would enable the kingdom and possibly neighbours to transport more oil without crossing the Strait of Hormuz.
Even after Saudi Arabia cut its price by the most in more than two decades for Saudi Arabian crude oil sold to Asia it still costs more than some rival Gulf supplies.
(Reuters - Reporting by Anushree Mukherjee and Pranav Mathur in Bengaluru and Emily Chow in Singapore; Editing by Jacqueline Wong, Jamie Freed and Barbara Lewis)
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