SINGAPORE: Oil prices fell nearly 2% Tuesday as a pause in US-Iran attacks raised hopes for diplomacy and a recovery in disrupted Middle East energy flows.
Brent crude futures fell $1.47, or 1.66%, to $86.89 by 0326 GMT. West Texas Intermediate declined $1.45, or 1.76%, to $81.16.
Both benchmarks reached their lowest levels since July 20 after sliding around 8% in the previous session, Reuters reported.
US President Donald Trump said Monday that Washington was holding “good talks” with Iran. However, he warned that US strikes would resume if diplomacy failed. Iran also threatened retaliation if American attacks restarted.
IG analyst Tony Sycamore said the potential diplomatic off-ramp had reduced the market’s geopolitical risk premium. However, he warned that conditions remained fluid.
Read: Brent Weekly Gain Hits 13.5% as Red Sea Risk Grows
The restart of oil loadings at the Caspian Pipeline Consortium’s Black Sea terminal also pressured prices. The facility had stopped operations for one week following Ukrainian drone attacks.
Meanwhile, Barclays said Strait of Hormuz energy flows remained subdued. Net crude and refined-product exports averaged 2.9 million barrels per day in the week ended July 24. That compared with 5.9 million barrels per day the previous week.
Supply risks also remained around the Bab el-Mandeb Strait. Yemeni official Afrah al-Zouba said Houthi fighters aimed to restrict shipping through the waterway.
Marex analyst Edward Meir questioned whether the Houthis could enforce a complete blockade. Still, he said, traffic had declined significantly in the Red Sea and Strait of Hormuz. Weaker Asian demand had also prevented prices from rising further, he added.
A preliminary Reuters poll projected declines in US crude and gasoline inventories. Distillate stocks likely increased. The US Energy Information Administration will release its next weekly report on July 29.
