LONDON: Oil prices fell on Tuesday as signs of possible talks to end the US-Israeli war on Iran eased supply fears stemming from the blockade of the Strait of Hormuz.
Brent futures edged 37 cents lower, or around 0.37 percent, to $98.99 at 2:57 p.m. Saudi time, while US West Texas Intermediate crude fell $1.72, or 1.74 percent, to $97.36.
Both benchmarks rose in the previous session, with Brent climbing more than 4 percent and WTI nearly 3 percent, after the US military began a blockade of Iran’s ports. Oil prices rose 50 percent last month, a record.
While talk about the resumption of US-Iran talks put downward pressure on prices, the move lower ignores the loss of physical barrels of oil that are not moving, PVM Oil Associates’ analyst Tamas Varga said.
Attacks on energy infrastructure in the Middle East and Iran’s effective closure of the Strait of Hormuz have led to the largest oil supply disruption in history, the International Energy Agency said in its monthly report, with 10.1 million bpd lost in March.
“Resuming flows through the Strait of Hormuz remains the single most important variable in easing the pressure on energy supplies, prices and the global economy,” the IEA said.
The US military on Monday said its blockade of the Strait of Hormuz would extend east to the Gulf of Oman and the Arabian Sea, while ship-tracking data showed two ships turned around in the strait as the blockade started. NATO allies, including Britain and France, refrained from joining the blockade, calling instead for the waterway to reopen.
In response, Iran threatened to target ports in nations bordering the Gulf, following the collapse of weekend talks in Islamabad aimed at resolving the crisis over the strait, which in normal times is a passageway for about a fifth of global oil and liquefied natural gas supplies. However, three Iran-linked tankers entered the Gulf and were allowed to pass since their destinations were not Iranian ports, shipping data showed.
Negotiating teams from the US and Iran could return to Islamabad later this week, five sources told Reuters. A US official also said there was continued engagement on trying to get to an agreement while Pakistani Prime Minister Shehbaz Sharif also said efforts were still underway.
“In case talks between the adversaries fail to bear fruit, even revisiting the March highs cannot be ruled out as the decline in global oil inventories might spill into the third quarter and beyond,” Varga added.
The IEA sharply cut its forecasts for global oil supply and demand growth, with demand expected to fall by 80,000 barrels per day in 2026 and supply expected to decline by 1.5 million bpd in 2026.
Meanwhile, Russian oil product exports from the Black Sea port of Tuapse for April were revised up by about 60 percent to 1.27 million tonnes from 0.794 million tonnes in the preliminary plan, according to two traders and Reuters calculations.
Rosneft has been diverting supplies to the refinery from the Black Sea port of Novorossiysk after the terminal was heavily damaged in a drone attack.
In the US, truck fleets on average spent $5.52 per gallon on diesel as of Monday, surpassing the prior all-time high of $5.50 set in June 2022 after Russia invaded Ukraine. Trucking is a barometer of how the US economy is doing and is dominated by small businesses.
