Oil prices fell by more than 1% on Tuesday, extending losses from the previous session, amid signs of some progress in resuming crude oil flows through the Strait of Hormuz following talks between the United States and Iran.
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Brent crude futures fell $1.09, or 1.4%, to reach $76.81 a barrel by 06:07 GMT, while US West Texas Intermediate (WTI) crude slid 87 cents, or 1.2%, to $72.99 a barrel.
Prices had dropped by more than 3% on Monday after the United States granted Iran a 60-day sanctions waiver following preliminary talks, and officials reported a subsiding of hostilities in Lebanon as part of the broader agreement.
"The gradual increase in oil flows through the Strait of Hormuz continues to weigh on the market," ING Bank analysts said in a note.
Vessel-tracking data showed that two crude oil tankers carrying just under two million barrels of oil sailed through the Strait of Hormuz on Monday, signaling a recovery in traffic after flows dwindled on Sunday due to concerns over passage through the strait.
"Transits appear to have risen sharply over the last few days, which the market will view as an indicator of both physical oil, potentially contracts, and also diplomatic progress," Neil Crosby, head of research at Sparta Commodities, said in a note. "It looks like we're going to remain stuck in this state of risk-on, risk-off until something changes."
The developments came after a start to the week where the agreement appeared threatened after US President Donald Trump brandished the prospect of resuming war if Iran closed the Strait of Hormuz.
"There is still a prevailing dose of skepticism in the market, rooted in deep distrust between Washington and Tehran, suggesting that any return to pre-war oil prices is likely to be delayed rather than immediate," said Tim Waterer, chief market analyst at KCM Trade.
Meanwhile, analysts in a Reuters poll estimated that US crude oil inventories fell last week, alongside drawing down distillate and gasoline stocks.
US Department of Energy data showed on Monday that crude oil inventories in the Strategic Petroleum Reserve (SPR) fell last week to 331.2 million barrels, their lowest level since June 1983, as supplies tightened in the wake of the conflict between the United States and Iran.
Reuters
