Oil prices fell more than 5% on Tuesday to their lowest level in three weeks as comments from US and Qatari officials raised hopes of progress towards a diplomatic resolution to the Iran war and a reopening of the Strait of Hormuz.
Brent crude futures settled US$4.41 or 5.3% lower at US$79.36 a barrel, while US West Texas Intermediate crude fell US$4.57 or 5.7% to US$75.77 a barrel. Both benchmarks settled at their lowest levels since July 13.
US Secretary of State Marco Rubio said talks involving Iran and Oman had made progress on allowing more ships to pass through the Strait of Hormuz, although no final agreement had been reached. US Treasury Secretary Scott Bessent had earlier said a deal could come as soon as Tuesday or Wednesday.
Qatar also signalled continued diplomatic efforts. Its Foreign Ministry spokesperson Majed al-Ansari said work towards a resolution was ongoing, while Qatar’s Emir and US President Donald Trump discussed efforts to reduce tensions and narrow differences between Washington and Tehran.
The prospect of a diplomatic breakthrough has reduced some of the geopolitical premium built into oil prices amid concerns over supply disruptions, according to Simon-Peter Massabni, head of business development at brokerage XS.com.
However, physical flows through the region remained under pressure. Shipping traffic through the Strait of Hormuz and Bab el-Mandeb showed little change at the start of the week, while Middle Eastern producers have been forced to cut output as disruptions persist.
ANZ analysts said Strait of Hormuz transits had only marginally improved from extremely depressed levels, with Iranian attacks on vessels continuing to constrain exports.
The market also remains sensitive to developments around the conflict. Goldman Sachs expects Brent crude to trade between US$80 and US$90 a barrel until there is confirmation of a new US-Iran agreement or a significant escalation in attacks.
The Saudi Aramco chief executive also said more than 2.6 billion barrels of oil had been lost from global supply since the Iran war began in February.
Reuters
