Oil prices extended their decline on Tuesday, falling more than 1% as signs of improving crude shipments through the Strait of Hormuz eased concerns about global supply disruptions.
The latest market move followed progress in peace negotiations between the United States and Iran, which raised hopes that shipping activity through the strategic waterway could gradually return to normal.
Brent and WTI Oil Prices Decline
Brent crude futures fell by $1.09, or 1.4%, to $76.81 per barrel during early trading.
US West Texas Intermediate crude dropped by 87 cents, or 1.2%, to $72.99 per barrel.
Both benchmarks extended losses from Monday, when oil prices declined by more than 3%.
US-Iran Peace Talks Ease Supply Concerns
Oil markets moved lower after the United States granted Iran a 60-day sanctions waiver following initial peace talks.
Officials also reported a pause in hostilities in Lebanon as part of the broader agreement.
These developments reduced immediate fears of further disruption to Middle East oil production and shipping routes.
ING analysts said the gradual recovery in oil flows through the Strait of Hormuz continued to place downward pressure on crude prices.
Tanker Traffic Through Hormuz Begins to Recover
Two crude oil tankers carrying just under 2 million barrels passed through the Strait of Hormuz on Monday, according to ship-tracking data.
The development suggested that traffic through the waterway was recovering after shipments weakened on Sunday because of concerns about safe passage.
The Strait of Hormuz remains one of the world’s most important energy routes. Any disruption to shipping through the area can significantly affect oil supplies and global prices.
Rising Shipments Signal Diplomatic Progress
Neil Crosby, head of research at Sparta Commodities, said the recent increase in tanker movements could be interpreted as evidence of both improving physical oil flows and diplomatic progress.
However, he noted that the market could remain in a cautious and bearish mood until the political situation changes more significantly.
Investors are likely to continue monitoring vessel traffic closely for signs that shipping conditions are becoming more stable.
Geopolitical Risks Have Not Disappeared
The decline in oil prices followed a tense weekend that appeared to threaten the week-old peace agreement.
US President Donald Trump warned that the conflict could restart if Iran disrupted shipping through the Strait of Hormuz. The warning came after Tehran declared that the strategic waterway was closed.
Although tanker traffic has begun to recover, uncertainty surrounding the agreement remains high.
Markets Remain Sceptical About Lasting Peace
Tim Waterer, chief market analyst at KCM Trade, said investors remained sceptical because of the deep mistrust between Washington and Tehran.
As a result, a return to oil prices recorded before the conflict may take time, even if diplomatic negotiations continue.
The market is balancing optimism about peace talks against the continuing risk of renewed hostilities or shipping disruptions.
US Crude Inventories Expected to Decline
A Reuters survey showed that analysts expect US crude oil inventories to have fallen during the previous week.
Gasoline and distillate stockpiles are also expected to have declined.
Lower inventories could provide some support to oil prices by indicating tighter supplies in the United States.
Strategic Petroleum Reserve Falls to 1983 Low
US government data released on Monday showed that crude oil held in the Strategic Petroleum Reserve declined to 331.2 million barrels last week.
This represented the lowest reserve level since June 1983.
Supplies tightened following the US-Iran conflict, increasing concerns about the country’s ability to respond to future disruptions in global oil markets.
