Brent crude climbs as hopes fade for a Hormuz reopening

Oil prices rose on Monday as hopes weakened that the Strait of Hormuz would reopen soon. Brent crude futures gained 3.3 percent to $84.64 a barrel, while US West Texas Intermediate crude rose 3.1 percent to $80.63.

The increase came after Iran called for the United States to end military threats and sanctions and provide compensation as conditions for reopening the strategically important waterway.

What is driving the market move

Brent futures rose by more than $2 during Monday trading. SEB Research analysts said oil was trading between $80 and $85 a barrel even though the strait remained essentially closed, reflecting hopes that a solution could be reached soon.

Oil and gas companies also gained in US markets. ExxonMobil rose 2.9 percent in midday trading, Chevron increased 3.1 percent, BP gained 2.1 percent and Shell rose 1.2 percent. ConocoPhillips was up 2.7 percent after the market opened.

Related coverage: Brent crude climbs as Strait of Hormuz deal remains uncertain.

Why prices had eased last week

The two major oil benchmarks fell 7 percent last week as hopes grew that the United States and Iran were nearing an agreement that could reopen the strait.

That decline brought short-term relief for US drivers. The American Automobile Association said the average petrol price fell by nine cents over the week to $4.00 a gallon, or 3.78 litres, from $4.09.

What could happen to petrol prices

Patrick De Haan, head of petroleum analysis at GasBuddy, said upward pressure on fuel prices could return quickly while the strait remains closed. He warned that the US national average could reach its highest level ever recorded this late in the calendar year if developments do not go well.

More context: US strikes on Iran trigger rise in oil prices and fall in global stocks amid Hormuz tensions.

The direction of petrol prices now depends in part on how the situation around the Strait of Hormuz develops in the days ahead.

Also read: Oil prices reach one-month peak as US-Iran conflict disrupts Strait of Hormuz shipping.