Oil prices slide as US-Iran tensions ease
Global oil prices declined by about 1% on Tuesday as investors assessed the possibility of a diplomatic breakthrough between the United States and Iran.
Brent crude futures fell by 54 cents, or 0.6%, to $87.82 a barrel. US West Texas Intermediate crude dropped 66 cents, or 0.8%, to $81.95 a barrel.
Both benchmarks had fallen by around 1% earlier in the session. They reached their lowest levels in more than a week.
The decline came after US President Donald Trump said Washington was engaged in positive talks with Iran. He also indicated that a settlement could be possible.
However, Trump warned that US strikes could resume if negotiations fail. Iran has also indicated that it would respond to further attacks.
The possibility of diplomatic progress has reduced some concerns about disruptions to oil supplies from the Middle East.
Analysts said the market remained highly uncertain. Any breakdown in negotiations could quickly push oil prices higher.
Concerns about attacks by Yemen-based Houthi fighters have also influenced the market.
Officials in Yemen have warned that the Houthis could seek to disrupt shipping through the Bab el-Mandeb Strait. The waterway is an important route for international energy shipments.
Market analysts remain uncertain about whether the Houthis have the ability to impose a complete blockade. However, shipping activity in the Red Sea and nearby waters has already declined significantly.
The Strait of Hormuz is another major concern for energy markets. It is a key route for global oil shipments.
Recent data showed that oil and refined product exports through the strait had dropped sharply.
Net exports averaged around 2.9 million barrels per day in the week ending July 24. The figure was nearly 5.9 million barrels per day during the previous week.
The lower shipping volumes have added to concerns about global energy supplies.
However, analysts said weaker demand was also preventing oil prices from rising further.
Demand in Asia has been particularly affected. Slower consumption could reduce pressure on the global oil market.
Investors are also watching US energy inventory data.
A preliminary market survey indicated that US crude oil stocks probably declined last week. Gasoline inventories were also expected to fall.
Distillate stocks, which include diesel and heating oil, were estimated to have increased.
The market is now closely following developments in US-Iran talks.
A successful diplomatic agreement could reduce fears about supply disruptions and support the normal flow of energy shipments.
A breakdown in negotiations, however, could revive concerns over attacks and shipping disruptions.
