LONDON: Oil prices fell more than 1 percent on Tuesday, paring the previous session’s sharp gains, as Iran reviewed a proposed agreement with the US to halt the war between the two countries, Iran’s Mehr News reported.
President Donald Trump said on Monday that negotiations with Iran were continuing and there would be a deal to extend the ceasefire and reopen the Strait of Hormuz over the next week.
Iran has not yet responded to a proposed final text of the temporary deal, Mehr cited a source as saying. Brent crude futures were down $1.13, or 1.2 percent, to $93.85 a barrel at 1130 GMT, while US West Texas Intermediate fell $1.09, or 1.2 percent, to $91.07 a barrel.
Both benchmarks rose more than 5 percent on Monday, having fallen more than 16 percent in May on hopes of a peace deal.
Despite the developments on talks, “oil flows through the strait remain restricted,” due to the conflict in the region, said UBS analyst Giovanni Staunovo.
Global oil inventories could hit critical or historically low levels just ahead of the peak summer demand period if stock draws continue at their current pace, the head of the International Energy Agency’s oil industry and markets division said on Tuesday.
An executive from Abu Dhabi’s state oil company also said on Tuesday that August could mark a tipping point for much higher oil prices if demand picks up and the Iran war supply crisis persists.
“The market is currently focused on whether there’s any concrete progress or setbacks in US-Iran negotiations, the tone and substance of statements from both sides, and actual physical tanker movements through the waterway,” said Tim Waterer, chief market analyst at KCM Trade.
The status of negotiations will determine whether the current risk premium remains embedded in oil prices or starts to unwind, Waterer added.
Iran has effectively halted most non-Iranian shipping in and out of the Gulf since the war began, choking off about a fifth of global oil and liquefied natural gas flows and driving prices up by 50 percent or more. The U.S. has also maintained a blockade on Iranian ports.
