Oil prices fell more than 1 percent on Tuesday, extending losses from the previous session, as signs of progress in restoring crude flows through the Strait of Hormuz emerged following US-Iran peace talks. Brent crude futures declined by $1.09, or 1.4 percent, to $76.81 a barrel, while US West Texas Intermediate dropped 87 cents, or 1.2 percent, to $72.99 a barrel as of 09:07 a.m. Saudi time.
Market Reaction to Diplomatic Developments
Prices had already fallen more than 3 percent on Monday after the United States granted Iran a 60-day sanctions waiver following initial peace talks. Officials also reported a lull in hostilities in Lebanon under the broader agreement. The market is closely monitoring the situation in the Strait of Hormuz, a critical waterway for global oil shipments.
“The gradual increase in oil flows through the Strait of Hormuz continues to weigh on the market,” said ING analysts in a note. Ship-tracking data showed that two crude tankers carrying just under 2 million barrels of oil sailed through the strait on Monday, indicating that traffic was picking up after weaker flows on Sunday due to concerns over passage safety.
Analyst Insights on Market Sentiment
Neil Crosby, head of research at Sparta Commodities, commented in a note: “Transits over recent days look to have risen sharply, (which) the market will treat as a proxy for both physical oil, perhaps paper oil, and diplomatic progress. It feels like we will be stuck in this bearish risk-off/optimistic mood until such time as something changes.”
The price declines follow a weekend that had threatened to jeopardize the week-old accord, including threats from US President Donald Trump to restart the war if Iran disrupted shipping through the Strait of Hormuz after Tehran declared the strategic waterway closed.
Skepticism Remains Despite Progress
Tim Waterer, chief market analyst at KCM Trade, noted: “There remains a prevailing dose of market scepticism, rooted in deep-seated mistrust between Washington and Tehran, suggesting that any return to pre-war oil prices is likely to be delayed rather than immediate.”
Separately, analysts in a Reuters poll expect US crude inventories to have fallen last week, along with distillate and gasoline inventories. On Monday, government data showed US crude stocks in the Strategic Petroleum Reserve fell to 331.2 million barrels last week, the lowest since June 1983, as supplies tightened in the wake of the US-Iran conflict.
