Oil prices fell early Tuesday following reports Iran is considering a new U.S. peace deal to end the war, a day after prices surged after the two sides appeared to be on the brink of resuming hostilities.
West Texas Intermediate crude oil for July delivery was last seen down $1.23 to US$90.93 per barrel, while August Brent oil was down $1.30 to US$93.68.
Prices surged 5.5% on Monday after the United States and Iran traded strikes while Iran said it was refusing to continue talks on a peace deal as long as Israel continued its attacks on Iran-backed Hezbollah militants in Lebanon. However Reuters on Tuesday reported Iran is considering a fresh U.S. proposal to end the war and reopen the critical Strait of Hormuz, citing Iranian media, while U.S. President Trump said on Monday talks were continuing.
"Crude oil continues to trade from one headline to the next, making it increasingly difficult for traders to maintain conviction beyond a few hours. On Monday, prices posted their biggest one-day gain in a month after rebounding from a six-week low when Iranian officials reportedly halted negotiations with the US in protest over Israel's expanded military operations in Lebanon. President Trump later sought to calm markets by insisting talks remained ongoing and that he had spoken with Israeli Prime Minister Netanyahu, although the two sides offered differing accounts of the conversation. Beneath the headline-driven volatility, global energy markets continue to tighten," Saxo Bank noted.
Toril Bosoni, the head of the International Energy Agency's oil industry and markets division, on Tuesday said global oil inventories could fall to critical levels as summer demand rises while stocks fall with the the Middle East war keeping 14-million barrels per day of Persian Gulf supply off the market with the Strait of Hormuz blocked, Bloomberg reported.
The IEA official said the agency expects reopening the key Strait will likely take at least six months to fully restore Persian Gulf exports once a peace deal is reached, forcing higher prices to prompt demand destruction as importing countries hunt for supply.