By Ishaan Arora
Aug 11 (Reuters) - Oil prices rose more than 1% on Tuesday as hopes for a U.S.-Iran deal to end the war and reopen the Strait of Hormuz faded after President Donald Trump demanded compensation for damages from Tehran.
Brent crude futures rose $1.4, or 1.6%, to $89.12 a barrel by 0701 GMT, while U.S. West Texas Intermediate crude futures were up $1.35, or 1.64%, to $83.48 a barrel.
Both benchmarks rose more than 5% on Monday to their highest since July 31, after Trump responded to Iran's
conditions for a peace deal with his own demands that Iran pay compensation for people killed in wars, attacks and protests, which is likely to complicate efforts to reopen the Strait of Hormuz.
Later in the day he added that the U.S. had control of the strait and had swept the strategic oil waterway for Iranian mines.
"There appears to be a gulf, no pun intended, between the U.S. and Iran over what any agreement would actually look like," said Tim Waterer, chief market analyst at KCM Trade.
"As a result, some of the optimism that built up last week is being unwound, giving oil prices a decidedly bid tone."
Meanwhile, Saudi Aramco has postponed the restart of its 400,000-barrel-per-day Jazan refinery to August 30 after the Houthis claimed two attacks on the plant on Sunday.
"The chokehold risk around both the Strait of Hormuz and the Bab el-Mandeb remains highly significant. Even intermittent restrictions or the threat of further incidents keep insurance costs elevated and force longer shipping routes ... hence energy flows look likely to stay constrained near term," Waterer said.
In a note on Monday, analysts at Barclays said that in the week ending August 7, crude oil and refined product net exports through the Strait of Hormuz averaged 3 million barrels per day, down from 4.4 million bpd the previous week.
Shipping data showed that traffic through the Strait of Hormuz fell to six vessels on Monday, compared with a 10-day average of about 11 vessels.
In the meantime, oil continues to leak through both blockades via ship-to-ship transfers and overland bypasses. Presuming these flows continue, the market will likely remain in a state of morbid detachment, broadly contained between $75.00 and $95.00, said IG's analyst Tony Sycamore.
Meanwhile, the Abu Dhabi National Oil Company (ADNOC) is offering spot crude in a tender, its eighth issued since the start of June as the UAE state oil company works to move oil from inside the Strait of Hormuz.
(Reporting by Ishaan Arora in Bengaluru; Editing by Sonali Paul and Sharon Singleton)
