Global oil benchmarks moved lower for a second day as traders weighed comments this week indicating that diplomacy between the U.S. and Iran could restart, potentially paving the way for crude and fuel shipments from the Middle East to resume.
At 00:54 GMT Brent crude futures were trading down $0.52, or 0.55%, at $94.27 a barrel after posting a 4.6% decline in the previous session. U.S. West Texas Intermediate was trading at $90.24, down $1.04, or 1.1%, following a 7.9% slide on the day before.
U.S. President Donald Trump said on Tuesday that talks intended to end the war between the U.S. and Israel and Iran could reconvene in Pakistan over the next two days, after negotiations over the weekend collapsed and were followed by Washington imposing a blockade on Iranian ports. Market participants interpreted the comments as boosting the chance that diplomacy could eventually settle the conflict and allow crude and refined product flows that have been disrupted to resume.
The conflict has led to a shutdown of the Strait of Hormuz, a crucial maritime passage for crude and refined products leaving the Gulf for buyers in Asia and Europe. Although a two-week ceasefire is in place, transit through the strait remains unpredictable. Sources said on Tuesday that traffic through the waterway is only a fraction of the roughly 130 vessels that typically transited prior to the war.
Complicating the outlook on physical flows, a U.S. destroyer intercepted and prevented two oil tankers from departing Iran on Tuesday, according to a U.S. official.
Market commentary highlighted the contrast between hopeful diplomatic headlines and the fragmented on-the-ground reality. "While diplomatic headlines suggest the possibility of renewed U.S.-Iran talks and even a temporary easing of transit restrictions, the physical reality remains fragmented," the Schork Group said in a note. "The result is a market that continues to price optionality around flow disruption rather than a return to equilibrium."
At the same time, U.S. policy choices are tightening potential sources of supply. Two U.S. administration officials said the U.S. will not renew a 30-day waiver of sanctions on Iranian oil at sea that expires this week, and that a similar waiver on sanctions related to Russian oil was quietly allowed to lapse over the weekend.
Traders will be watching official U.S. inventory data from the Energy Information Administration, due at 10:30 a.m. ET (1430 GMT). A Reuters poll had indicated expectations that U.S. crude oil stocks rose slightly last week while distillate and gasoline inventories likely fell. Separately, market sources familiar with American Petroleum Institute figures said U.S. crude inventories jumped for the third consecutive week.
Those inventory signals, together with evolving diplomatic developments and on-the-water disruptions, are shaping a market that remains cautious about whether a return to steady Gulf flows is near or whether episodic constraints will continue to support price volatility.