Oil prices rose in early trade on Tuesday amid supply concerns, as Iran denied it had held talks with the United States to end the war in the Gulf, contradicting US President Donald Trump, who said a deal could be reached soon.
Brent futures rose US$1.06, or 1.1 per cent, to US$101 a barrel at 0001 GMT, while US West Texas Intermediate (WTI) climbed US$1.58, or 1.8 per cent, to US$89.71.
Crude futures had dropped more than 10 per cent on Monday, after Trump said he had ordered a five-day delay to attacks he had threatened on Iran's power plants, adding that the US had held productive talks with unnamed Iranian officials that had produced "major points of agreement".
"By shelving the plan to strike Iranian power plants for five days, the U.S. effectively sucked much of the 'war premium' from the oil price," said KCM Trade chief market analyst Tim Waterer.
"Today's moderate bounce is just the market finding its footing in the mud. Traders are aware that while the missiles are on hold, the Strait of Hormuz is still far from a clear waterway."
The war has all but halted shipments of about one-fifth of the world's oil and liquefied natural gas through the Strait of Hormuz. However, two tankers bound for India sailed through the strait on Monday.
Tehran rejected the claim of contact with Washington, dismissing it as an attempt to manipulate financial markets, while Iran's Revolutionary Guards said they had attacked U.S. targets and denounced Trump's comments as "worn-out psychological operations".
"Even with a possible decrease in tensions after Monday's announcement from President Trump, we expect a price floor of US$85–US$90 and a natural drift back to the US$110 range until the Strait of Hormuz is restored," Macquarie said in a note.
It added that if the strait remains effectively shut until the end of April, Brent could still reach US$150 per barrel.
Fighting has damaged energy infrastructure across the region. In the latest attacks, a gas company office and a pressure-reduction station were hit in Iran's central city of Isfahan, while a projectile also struck a gas pipeline feeding a power station in Khorramshahr, the Iranian semi-official Fars news agency reported.
The United States has temporarily waived sanctions on Russian and Iranian oil already at sea to ease shortages. Industry sources said traders have offered Iranian crude to Indian refiners at a premium to ICE Brent following Washington's move.
The Fatih Birol, Executive Director of the International Energy Agency, said on Monday he is consulting Asian and European governments on possible further releases of strategic reserves "if necessary".
Oil executives and energy ministers at a conference in Houston warned of the longer-term impact of the US–Israel war with Iran on the global economy, though US Energy Secretary Chris Wright downplayed the crisis.
