Audio By Carbonatix
Oil prices rebounded on Tuesday amid concerns about the lack of details in a preliminary agreement to end the war between the U.S. and Iran and the realisation that the resumption of supply through the key Strait of Hormuz may take longer than thought.
Brent crude futures gained 26 cents, or 0.3%, to $83.42 a barrel, and U.S. West Texas Intermediate rose to $81.12 a barrel, up 46 cents, or 0.3%, as of 0108 GMT.
On Monday, oil prices fell by nearly 5% to their lowest close since March 4 after U.S. President Donald Trump said a memorandum of understanding was signed to end the U.S.-Israeli war with Iran, which had closed the Strait of Hormuz that typically carried one-fifth of the world's oil supply before the conflict and caused about 14 million barrels per day of output to be shut in.
Despite the optimism following the announcement, the full details of the memorandum have not been released publicly and a permanent truce has not been worked out.
Early indications are the agreement would reopen the blockaded Strait of Hormuz and extend a ceasefire for 60 days, allowing negotiators to tackle difficult issues like the future of Iran's nuclear program.
On Monday, Iranian President Masoud Pezeshkian said the U.S.-Iran memorandum of understanding was an "important step" toward stopping the fighting but a final agreement for a lasting truce "has yet to take shape."
"The devil may be in the details, and until those details emerge, the market is likely to show restraint regarding the further unwinding of the risk premium in energy markets," said Tim Waterer, chief market analyst at KCM Trade.
A senior Iranian official said on Monday pending a final agreement Iran would freeze its nuclear activity, refraining from further uranium enrichment or the expansion of nuclear facilities.
Even with the current agreement, it remains unclear how quickly the curtailed supply will be able to return to the market.
"The path back to normal supply flows remains far from straightforward," said Tony Sycamore, market analyst at IG.
"Clearing mines, restoring full marine insurance coverage, and getting vessels and operators comfortable enough to return to the Gulf will all take time as will bringing shuttered wells and damaged regional infrastructure back online," Sycamore added.
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