LONDON: Oil prices fell on Tuesday as signs of a possible resumption in talks to end the U.S.-Israeli war on Iran eased supply fears stemming from the blockade of the Strait of Hormuz.
Brent crude futures lost $1.70, or 1.71%, to $97.66 a barrel by 1314 GMT. U.S. West Texas Intermediate crude fell by $2.97, or 3%, to $96.11.
Both benchmarks rose in the previous session, with Brent climbing more than 4% and WTI nearly 3%, after the U.S. military began a blockade of Iranian ports.
While talk of a resumption in U.S.-Iran talks applied downward pressure on prices, the move lower ignores the loss of physical barrels of oil that are not moving, said PVM Oil Associates analyst Tamas Varga.
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 barrels per day lost in March.
Tankers exit Gulf via Strait of Hormuz as US-Iran talks begin
“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 U.S. military said on Monday that its blockade of the Strait of Hormuz would extend east to the Gulf of Oman and the Arabian Sea. Ship-tracking data showed that two ships turned around in the strait as the blockade started. However, three Iran-linked tankers entered the Gulf and were allowed to pass because their destinations were not Iranian ports, shipping data showed.
In response, Iran threatened to target ports in nations bordering the Gulf.
Meanwhile, negotiating teams from the U.S. and Iran could return to Islamabad this week, five sources told Reuters. A U.S. official also said there was continued engagement on trying to achieve an agreement while Pakistani Prime Minister Shehbaz Sharif also said efforts were still under way.
“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,” PVM’s Varga said.
The IEA sharply cut its forecasts for global oil supply and demand growth, with demand expected to fall by 80,000 bpd in 2026 and supply expected to decline by 1.5 million bpd.
Meanwhile, planned Russian oil product exports from the Black Sea port of Tuapse for April have been revised upwards by about 60% to 1.27 million metric tons from 0.794 million tons in the preliminary plan, according to two traders and Reuters calculations.
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