Key Points:
- Brent and WTI extend losses as traders await possible Iran-US talks in Doha
- Prospect of diplomacy eases fears of supply disruptions through the Strait of Hormuz.
- Conflicting signals from Washington and Tehran, along with weak Chinese demand, continue to cloud the outlook
ISLAMABAD: Oil prices edged lower on Tuesday as investors gauged the prospect of renewed diplomatic engagement between Iran and the United States against lingering uncertainty over the talks and the global demand outlook.
Iran and the US returning to dialogue has eased geopolitical risk, pulling crude further away from the highs reached during the recent Middle East conflict.
Brent crude futures for August delivery fell 64 cents, or 0.9 per cent, to $72.51 a barrel during early trading. The more actively traded September contract declined 31 cents, or 0.4 per cent, to $73.60.
US West Texas Intermediate (WTI) crude for August delivery slipped 39 cents, or 0.6 per cent, to $70.36 a barrel.
The declines came after reports that Washington and Tehran could resume negotiations in Doha this week, most probably Tuesday. Trump’s statement, though contested by Iran, has revived hopes that diplomacy may prevent further disruption to oil exports from the Gulf region.
Oil traders are still cautious
Market participants have increasingly priced out the geopolitical premium that had lifted crude prices earlier this month following military exchanges between the two countries.
However, Iranian officials maintained that no formal meeting with US representatives had been scheduled.
Iran’s denial of technical talks tempered expectations of an imminent breakthrough despite comments from US President Donald Trump indicating talks could take place in the Qatari capital.
Analysts said the market remains highly sensitive to developments surrounding the negotiations.
They believe any progress could further reduce concerns over supply disruptions through the Strait of Hormuz, the strategic waterway that carries roughly one-fifth of the world’s seaborne crude oil trade.
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Adding to the cautious optimism, Iranian Deputy Foreign Minister Kazem Gharibabadi said experts from Iran and Oman would begin discussions on new shipping arrangements through the Strait of Hormuz.
The initiative on maritime safety follows weeks of heightened tensions, although Tehran has indicated that future vessel movements may be subject to designated transit corridors.
Despite the easing geopolitical premium, traders remain cautious as uncertainty persists over the durability of the fragile ceasefire and the broader diplomatic process.
Shipping companies and insurers also continue to monitor security conditions in the Gulf before fully restoring normal operations.
Oil prices have also faced pressure from concerns over slowing demand growth, particularly in China, the world’s largest crude importer.
Recent manufacturing and industrial data have revealed an uneven economic momentum, raising questions about the pace of fuel consumption during the second half of the year.
Market analysts said investors are also positioning ahead of key US economic data and weekly inventory figures, which could provide fresh signals on demand in the world’s largest oil-consuming economy.
Although crude prices have retreated sharply from the peaks recorded during the height of the Iran-US confrontation, analysts cautioned that the market remains vulnerable to sudden swings.
Any setback in diplomatic efforts, renewed military activity, or disruption to shipping through the Strait of Hormuz could quickly restore the geopolitical risk premium.
For now, traders appear to be betting that diplomacy will prevail. However, they remain reluctant to abandon defensive positions until both Washington and Tehran provide greater clarity on the path forward.
Markets now await concrete diplomatic progress and fresh demand signals to determine oil’s next direction.
