Crude oil prices have fallen on Tuesday as tensions in West Asia show potential of de-escalation after the US and Iran hinted at continuing peace talks.
Brent crude, the international benchmark, declined by $1.86, or 1.87 per cent, to $97.50, while US West Texas Intermediate (WTI) crude fell $2.25, or 2.27 per cent, to $96.83 by 00:03 GMT.
Both benchmarks had risen on Monday after Iran and the United States exchanged sharp criticism of each other following the deadlock of the talks.
Brent crude climbed more than 4 per cent, while West Texas Intermediate (WTI) jumped 3 per cent, after the US military began a blockade of Iran's ports.
On Monday the US military announced the closure of the Strait of Hormuz, Gulf of Oman and Arabian Sea, while maritime intelligence firms posted data showing two ships returning from the Strait of Hormuz.
In response, Iran threatened to target all ports in Gulf-bordering nations following the collapse of weekend talks in Islamabad aimed at resolving the crisis.
“Despite the breakdown of peace talks in Pakistan over the weekend, Trump has managed to take some steam out of the oil price again by dangling the carrot of a possible deal,” said Tim Waterer, chief market analyst at KCM Trade.
According to ANZ research, approximately 10 million barrels per day of crude supply have been effectively removed from the market, adding that a prolonged US blockade could curb an additional 3 to 4 million barrels of crude shipments.
“The oil market no longer needs a worst-case escalation to justify higher pricing levels. Tight balances alone are sufficient to sustain the price of Brent near or above recent threshold levels,” ANZ said in a client note.
Besides, US Energy Secretary Chris Wright suggested oil prices could peak in the next few weeks once shipping resumes properly through the Strait of Hormuz.
Also, the Organisation of the Petroleum Exporting Countries scaled back its second-quarter global demand forecast by 500,000 bpd in its latest monthly report.
Also read: Crude oil surges above $100 per barrel as Iran-US talks collapse
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