LONDON: Oil prices edged lower on Tuesday after a sharp rally in the previous session, as investors assessed mixed signals surrounding ongoing US-Iran negotiations and their potential impact on global energy supplies.
The decline followed comments from US President Donald Trump, who said talks with Iran were continuing despite reports from Iran’s Tasnim news agency that Tehran had suspended indirect negotiations with Washington. Developments in the talks remain closely watched because of their potential effect on oil exports and shipping through the Strait of Hormuz, a key global energy route.
Brent crude futures fell 75 cents, or 0.79%, to $94.23 a barrel, while US West Texas Intermediate (WTI) crude dropped 85 cents, or 0.92%, to $91.31 a barrel during early trading.
Both benchmarks had gained more than 5% in the previous session, although they ended May with losses exceeding 16% amid hopes that diplomatic progress could ease tensions in the Middle East.
Markets focused on diplomatic developments
Analysts said oil markets remain highly sensitive to any indication of progress or setbacks in US-Iran negotiations.
Priyanka Sachdeva, a senior market analyst at Phillip Nova, said uncertainty surrounding a potential agreement continues to influence market sentiment despite earlier expectations that tensions could ease.
Trump gave mixed signals on Monday, saying in a CNBC interview that he would not mind if the talks ended. Later, he said on social media that negotiations were continuing and told ABC News he expected an agreement that could extend the ceasefire and reopen the Strait of Hormuz within the coming week.
Tim Waterer, chief market analyst at KCM Trade, said traders were monitoring both diplomatic statements and shipping activity through the strategic waterway.
According to Waterer, the outcome of the negotiations will likely determine whether the geopolitical risk premium remains built into oil prices or begins to fade.
Strait of Hormuz remains a key concern
The Strait of Hormuz is one of the world’s most important energy transit routes, carrying a significant share of global oil and liquefied natural gas shipments.
Iran has largely restricted non-Iranian shipping through the Gulf since the conflict began, disrupting energy flows and contributing to higher crude prices.
Meanwhile, Lebanon announced a partial ceasefire between Hezbollah and Israel on Monday, a move seen as a limited step toward reducing broader regional tensions.
Tony Sycamore, market analyst at IG, said oil prices are likely to remain volatile until clearer evidence emerges regarding a potential peace agreement in the region.
Supply data also in focus
In addition to geopolitical developments, traders are monitoring US inventory data for signs of supply tightness.
A preliminary Reuters survey indicated that US crude stockpiles likely declined by about 3.6 million barrels in the week ended May 29. Gasoline and distillate inventories are also expected to have fallen.
At the same time, US crude exports reached a record 5.6 million barrels per day in May, driven by increased demand from refiners in Asia and Europe amid disruptions linked to the Middle East conflict.
Shipping industry representatives meeting in Athens said any future agreement between Washington and Tehran would need to provide clear guidelines for commercial vessels operating through the Strait of Hormuz before normal shipping activity can fully resume.
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