MIDDLE-EAST (Reuters): Oil prices pared gains on Tuesday after Qatar said efforts to secure a diplomatic resolution to the U.S.-Iran conflict were continuing. In contrast, disruptions to oil flows through key shipping routes persisted.
Front-month Brent futures rose 17 cents, or 0.2%, to $83.94 a barrel by 1124 GMT after hitting a session high of $86.33.
U.S. West Texas Intermediate (WTI) crude was down 30 cents, or 0.37%, at $80.04 a barrel after touching a session high of $82.33.
Both contracts were up more than 2% earlier in the session supported by uncertainty over prospects for a U.S.-Iran agreement.
"Oil prices are pairing earlier gains on comments from Qatari officials saying a potential U.S.-Iran resolution has been drafted," said Giovanni Staunovo, a UBS analyst.
Qatar Foreign Ministry spokesperson Majed Al Ansari said efforts to secure a diplomatic resolution to the conflict were continuing, with mediators including Qatar, Pakistan and Oman coordinating closely to facilitate negotiations and exchange draft proposals between the two sides.
"While production in the Middle East has recovered from the lows, it remains below pre-conflict levels, keeping the oil market undersupplied," Staunovo added.
GULF SHIPPING TRAFFIC LITTLE CHANGED
The Hormuz dispute is a central sticking point in talks. Before the conflict began in late February, the Strait of Hormuz handled about one-fifth of global daily oil and liquefied natural gas supplies.
Iran wants control over inbound shipping through the Strait of Hormuz and visibility over outbound traffic, with the ability to intervene if necessary, under a plan being discussed with Oman to reopen the strategic waterway, a senior Iranian source told Reuters on Tuesday.
"Gulf exports remained under pressure, with Strait of Hormuz transits only marginally improving from extremely depressed levels. The export disruption story is intact, with Iranian attacks on vessels constraining flows," ANZ analysts said.
Shipping traffic at the key Gulf waterways of Bab el-Mandeb and the Strait of Hormuz held largely unchanged at the start of the week.
Hormuz remains dangerous for vessels. On Tuesday, the UK Maritime Trade Operations agency flagged an incident 20 nautical miles (37 km) northeast of Oman's Al Khasab after a cargo vessel reported being struck by an unknown projectile.
In the Red Sea, six Saudi-flagged supertankers changed course in the Gulf of Aden recently for southern Africa, while two tankers laden with Saudi oil crossed the Bab el-Mandeb Strait, shipping data showed on Monday.
Goldman Sachs expects Brent to remain in an US$80-$90 a barrel range until there is either confirmation of a new U.S.-Iran agreement or a significant escalation in attacks and targets.
(Reporting by Anushree Mukherjee and Ishaan Arora in Bengaluru and Trixie Yap in Singapore; Editing by Christian Schmollinger, Andrei Khalip, Susan Fenton and Louise Heavens) -- Reuters
