Oil prices declined on Tuesday, surrendering much of the previous day’s gains as investors assessed the durability of a ceasefire between Iran and Israel announced after an appeal from U.S. President Donald Trump. Despite the pause in fighting, both nations signaled that military operations could resume if conditions deteriorate.
At 0741 GMT, Brent crude futures were trading down $1.33, or 1.4%, at $92.92 a barrel. U.S. West Texas Intermediate crude fell $1.73, or 1.9%, to $89.57 a barrel.
Tamas Varga, an analyst at PVM Oil Associates, noted that markets have seen similar periods before, where optimism surrounding a potential end to hostilities raised hopes that the three-month conflict in the Middle East could be drawing to a close.
With few other major market drivers in focus, traders reacted to statements from Iran and Israel confirming that attacks had been suspended. The development followed renewed Israeli military action against Iran and strikes in Lebanon over the weekend, events that had helped lift oil prices by around 5% on Monday.
“In the meantime, global oil inventories keep depleting and as data, whether weekly or monthly, becomes available, realization of dangerously low oil stockpiles worldwide could intensify the race for available barrels pushing Brent back above $100 once again,” Varga said.
Concerns about supply disruptions remain an important support for the market. Iran continues to restrict most shipping activity through the Strait of Hormuz, a critical route that before the conflict carried roughly 20% of global crude oil and liquefied natural gas trade. Meanwhile, the United States has maintained its blockade of Iranian ports.
Demand-side concerns also weighed on prices. China’s crude oil imports dropped 29% last month to their lowest level in eight years. Imports in April fell to a multi-year low of 9.3 million barrels per day, as refiners drew down stockpiles to offset a steeper decline from the average of 11 million barrels per day imported before the U.S.-Israeli conflict with Iran began.
Separately, the U.S. military announced on Monday that it had disabled an empty oil tanker in the Gulf of Oman after the vessel attempted to travel to an Iranian port in breach of the blockade currently imposed on Iran.
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