Oil prices fell on Tuesday as investors weighed the possibility of a diplomatic breakthrough between the US and Iran, easing fears over potential disruptions to Middle East energy supplies.
Brent crude futures dropped US$0.54, or 0.6%, to US$87.82 a barrel by 0046 GMT, while US West Texas Intermediate (WTI) crude declined US$0.66, or 0.8%, to US$81.95 a barrel. Both benchmarks had earlier fallen about 1% to their lowest levels in more than a week.
The decline came after US President Donald Trump said Washington was having “good talks” with Iran and that there was a chance of reaching a resolution, although he warned that US strikes could resume if negotiations failed.
“For now, the relief that an off-ramp has been found has taken the heat out of prices and eased concerns around Houthi attacks on Saudi infrastructure. However, the situation remains highly fluid,” said IG analyst Tony Sycamore in a client note.
Concerns over shipping disruptions remain, particularly around key trade routes. Marex analyst Edward Meir said traffic through the Red Sea and the Strait of Hormuz had dropped significantly, while demand weakness, especially in Asia, was also limiting further price increases.
Barclays analysts noted that crude oil and refined product exports through the Strait of Hormuz averaged 2.9 million barrels per day in the week ended July 24, down from 5.9 million barrels per day in the previous week.
Meanwhile, a preliminary Reuters poll showed US crude inventories likely declined last week alongside gasoline stocks, while distillate inventories were expected to rise.
