Crude prices pulled back slightly on Tuesday as diplomatic de-escalation efforts in the Middle East offered temporary relief to energy markets, even as the conflict and shrinking US strategic reserves keep supply risk premiums elevated.
Brent crude futures fell 0.9% to $88.40 per barrel, while Murban crude futures eased by 0.2% to $81.60/bbl.
"Oil prices have eased amid hopes of some de-escalation between the US and Iran. Yet risks to Saudi oil exports from the Red Sea are increasing," ING analysts said.
On diplomatic front, a senior Iranian official reportedly said that Tehran received a mediator-backed proposal for a 10-day ceasefire.
Despite ceasefire discussions, military action has not abated.
The US Central Command confirmed via X that a fresh wave of strikes was launched against Iran targeting military capabilities used to disrupt commercial shipping in the Strait of Hormuz.
On the supply side, the US Department of Energy released data showing that Strategic Petroleum Reserve inventories dropped by 5.1 million barrels over the week ending July 17, falling to 311.4 million barrels down from 316.5 million barrels the prior week, highlighting ongoing draws on emergency stockpiles as the market navigates the supply shock.
TPH Energy noted that higher crude prices drove renewable diesel margins higher, lifting renewable fuel stocks by 7.1% over the past week.