Oil Prices Rise After US Urges Caution for Vessels Traveling Near Iran

Oil prices rose more than 1% on Monday after the U.S. Department of Transportation issued an advisory to U.S.-flagged vessels to stay as far as possible from Iranian territory while voyaging through the Strait of Hormuz and Gulf of Oman.

Brent crude oil futures were up 89 cents, or 1.3%, at $68.94 a barrel by 11:24 a.m. EST (1624 GMT). U.S. West Texas Intermediate crude rose 83 cents, or 1.3%, to $64.38.

The U.S. DOT's Maritime Administration agency noted that vessels going through the Strait of Hormuz and Gulf of Oman have historically faced the risk of being boarded by Iranian forces, including as recently as February 3. The agency advised U.S.-flagged ships to stay close to Oman while eastbound in the Strait of Hormuz.

The advisory renewed concerns that tensions between the U.S. and Iran could lead to oil supply disruptions. About a fifth of the oil consumed globally passes through the Strait of Hormuz between Oman and Iran.

"The Iranian risk premium cannot be fully defused as long as U.S. warships are located where they are," said SEB analyst Bjarne Schieldrop.

Oil prices had dropped earlier in the session, extending last week's losses, after the U.S. and Iran pledged to continue indirect talks following what both sides described as positive discussions.

Still, on Saturday Iran's foreign minister said the country will strike U.S. bases in the Middle East if attacked by U.S. forces, which have built up their naval presence in the region over recent weeks.

"Extremely difficult to judge how it is evolving," UBS oil analyst Giovanni Staunovo said. "Watching day by day, now looking for a date to be set for round two of the talks", he said.

Investors are also monitoring Western efforts to curb Russia's income from oil exports that support its war in Ukraine. The European Commission has proposed a sweeping ban on any services that support Russia's seaborne crude oil exports.

Refiners in India, once the biggest buyer of Russia's seaborne crude, are avoiding purchases for delivery in April, sources said. If India fully stopped Russian purchases "this would be a sustained bullish development," said Sparta oil market analysts.

Meanwhile in Kazakhstan, the giant Chevron-led Tengiz oil field has recovered to around 60% of peak production and aims to reach full output by February 23, sources said.

(Reuters)