Key Points
- Brent oil slipped from Monday’s settlement of $115.81 a barrel
- US WTI closed at $101.76, losing 1.46 per cent
ISLAMABAD: Global oil prices declined in Asian trading on Tuesday as diplomatic efforts to ease the US-Iran war offered some relief to markets, which were still wary of attacks on energy infrastructure and shipping in the Arabian Gulf.
Attacks and maritime disruptions kept crude prices near six-month highs. But on Tuesday Brent crude futures fell 0.57 per cent to $115.15 a barrel.
Likewise, US West Texas Intermediate (WTI) crude declined 0.43 per cent to $101.32. The declines followed Monday’s settlements of $115.81 for Brent and $101.76 for WTI.
Despite the latest losses, both benchmarks recorded weekly gains last week.
Brent advanced about 6 per cent, while WTI rose 2.3 per cent as renewed Houthi attacks heightened concerns about oil infrastructure and regional shipping routes.
Diplomacy offers partial relief
Markets are responding to competing developments, with diplomatic contacts raising hopes of easing tensions while uncertainty over regional energy supplies continues to support prices.
Saudi Arabia, Turkey and Pakistan held talks with Iranian leadership in Tehran on Monday and agreed to continue discussions on peace and security.
Qatar has also pursued diplomatic contacts for reducing regional tensions.
The discussions have encouraged some investors to take profits after last week’s rally.
However, no lasting settlement has been established yet, and there is no clear evidence that oil shipments through the region can return to normal.
The war, which began on February 28 with US and Israeli strikes on Iran, has disrupted commercial shipping through the Strait of Hormuz. It has also spilt over to the Bab el-Mandeb Strait.
The Strait of Hormuz normally carries roughly one-fifth of global oil and other energy supplies, making prolonged disruption a major concern for import-dependent economies.
Risks haunt Middle East infrastructure
Supply concerns have limited the decline in crude prices. Yemen’s Houthi militia keep targeting oil infrastructure and civilian installations. However, the Coalition to Restore Legitimacy in Yemen has also destroyed the militia’s missile launching facilities, besides intercepting several missiles.
The coalition said on Monday that it had destroyed three drones targeting Riyadh and southern parts of the kingdom. Maritime security concerns have also persisted, with commercial shipping remaining vulnerable to attacks in and around the Strait of Hormuz.
Refined fuels face supply pressure
The pressure extends beyond crude oil. Diesel and jet fuel markets have become more vulnerable to supply shortages, elevated freight costs and reduced refinery output.
The International Energy Agency’s October oil market report said prolonged disruptions to Middle Eastern and Russian exports had tightened diesel supplies ahead of the Northern Hemisphere winter.
Global diesel exports in September fell 700,000 barrels per day from the previous year, while refinery maintenance and limited spare capacity heightened concerns about replenishing stocks.
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The agency also forecast that global oil demand would contract by an average of 2.6 million barrels per day in 2026, reflecting the war’s economic impact, restricted fuel availability, and higher energy prices.
Weaker demand could eventually restrain crude prices, even while shortages keep some refined products expensive.
Oil market outlook not clear yet
The near-term direction of oil prices will depend on whether diplomatic efforts produce a meaningful reduction in hostilities, whether attacks on Saudi infrastructure intensify, and whether commercial shipping through key regional waterways becomes more reliable.
A sustained diplomatic breakthrough could remove part of the geopolitical premium built into crude prices. Conversely, confirmed damage to major export infrastructure or further disruption to tanker traffic could reverse the latest declines.
For now, the latest losses represent a retreat from recent highs rather than clear evidence of a lasting decline. With Brent above $115 a barrel and WTI above $100, energy-importing countries remain exposed to volatility in crude prices, freight charges and refined-fuel costs.
