Crude prices extended their decline by over 1% on Tuesday as prospects for a US-Iran deal injected downward pressure, even as persistent Houthi attacks and severe disruptions in Red Sea shipping lanes sustained underlying market caution.
Front-month West Texas Intermediate crude futures fell 1% to $81.77 per barrel, while Brent futures fell by 1.2% to $87.29/bbl.
ING analysts noted that the sell-off continued with recent developments pointing toward further de-escalation, though they emphasized that there is still no notable pickup in Persian Gulf oil flows.
Market caution persists as participants weigh the durability of any potential diplomatic progress against ongoing physical supply constraints.
Optimism over potential resolutions followed statements from US President Donald Trump, who said aboard Air Force One that Iran had requested talks after recent military strikes, signaling a possible deal.
While the prospects of diplomatic de-escalation have injected downward pressure on benchmarks, market experts warn that a substantial risk premium remains necessary.
ING highlighted that for any downward price trend to be sustained, a genuine recovery in tanker flows through critical maritime chokepoints is required, noting that recent events have exposed how quickly agreements can unravel.
Compounding regional supply uncertainties, trade flows face persistent threats following Houthi attacks targeting Saudi oil infrastructure and shipping lanes.
According to Kpler data, Saudi crude exports moving through the Bab el-Mandeb Strait have dropped sharply. Prior to the July 22 attacks, Saudi west coast crude shipments leaving Yanbu had averaged roughly 3 million barrels per day, underscoring the vulnerability of Red Sea logistics.
Meanwhile, market focus shifts toward upcoming supply fundamentals. Macquarie strategists projected in a Monday note that weekly US crude inventory data from the Energy Information Administration will show a 6.1-million-barrel draw for the week ending July 24, following a 2-mmbbl build in the prior week.
Traders await the official EIA inventory figures due on Wednesday to gauge domestic demand trends against the backdrop of broader Middle Eastern supply risks.