(RTTNews) – Extending the losses from two consecutive sessions, crude oil prices have plunged on Tuesday amid rising optimism over a resolution to the U.S.-Iran conflict as both nations continued to pause mutual attacks, easing supply disruption concerns.
WTI Crude Oil for September month delivery was last seen trading down by $3.61 (or 4.37%) at $79.00 per barrel.
The Middle East tension de-escalated over last weekend after U.S. President Donald Trump ordered the U.S. military to halt attacks on Iran.
Yesterday, Trump admitted that the U.S. and Iran were engaged in talks and stated optimistically that some good outcome could show up.
However, Iran denied any ongoing negotiations with the U.S. but acknowledged that intermediaries convey messages from the U.S. to Iran.
After nearly two weeks of intense attacks by both sides, last Friday, the war subsided. Iran assured that it would refrain from any attacks as long as the U.S. stops its offensives.
Oman, Qatar, and Pakistan are coordinating their efforts to translate the current pause on attacks by both sides to a long-lasting ceasefire.
Despite contradictory reports on the status of talks, market sentiment remained positive as U.S. forces halted their attacks on Iranian targets for the fourth consecutive night and expectations for a permanent settlement to the gulf crisis, which is heading for the sixth month, have increased.
Meanwhile, yesterday evening, Iran’s Foreign Minister Abbas Araghchi held separate telephone conversations with the foreign ministers of Saudi Arabia and Oman to discuss the latest regional developments as well as the management of the Strait of Hormuz.
Today, citing a gulf source, Reuters reported that Oman has proposed a joint regional mechanism to manage the shipping traffic across the Strait of Hormuz. The proposal has gulf backing.
Recently, the Iran-backed Houthi militants in Yemen announced a naval blockade on Saudi Arabian vessels in the southern Red Sea and Bab el-Mandeb Strait.
After Houthis attacked two Saudi Arabian oil tankers transiting the Red Sea, operators are diverting tankers to the Suez Canal in Egypt to circumvent the Bab el-Mandeb Strait.
Currently, with the prevailing concerns of aerial attacks across the Strait of Hormuz, tankers are using the Bab el-Mandeb sea-route as an alternative the Houthis now intend to disrupt. Nearly, 12% of global commerce passes through this corridor.
Last Friday, Reuters reported that in its upcoming meeting on August 2, the Organization of Petroleum Exporting Countries is likely to announce a further hike in oil output targets from September by about 188,000 barrels per day, matching the same quotas of June, July, and August.
Today, Reuters reported that the producers’ group is expected to pause the oil-production quota hikes after a final increase in September.
Due to the Middle East war and the disruption across the Strait of Hormuz sea-route, the member-nations of OPEC instituted large cuts to their output and export volumes, making the hikes symbolic.
The U.S. dollar index was last seen trading at 101.38, down by 0.14 (or 0.14%) today.
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