Oil markets extended their decline on Tuesday, with prices down around 1% for a second straight session, as investors assessed signs of a potential easing in tensions between the United States and Iran. Additional pressure came from a firmer U.S. dollar, which tends to dampen demand for dollar-priced commodities.
By 0903 GMT, Brent crude futures were lower by 68 cents, or 1%, at $65.62 a barrel. U.S. West Texas Intermediate crude also slipped 60 cents, or 1%, to $61.54 a barrel.
The latest losses follow a sharp sell-off on Monday, when oil prices fell more than 4% after U.S. President Donald Trump said Iran was “seriously talking” with Washington, a comment interpreted by markets as a signal of possible de-escalation with the OPEC producer.
Officials from both countries told Reuters that Iran and the United States are expected to restart nuclear negotiations on Friday in Turkey. Trump also warned that with large U.S. warships moving toward Iran, “bad things could happen” if the talks fail to deliver an agreement.
Iranian President Masoud Pezeshkian said on Tuesday that engagement with the U.S. should continue to safeguard Iran’s national interests, provided that “threats and unreasonable expectations” are avoided, in a post on X.
“The volatile price actions of oil seen in the last four weeks have been driven by the geopolitical risk premium factor that is linked to the current U.S. administration’s expansionary foreign policy, especially the ’on-off’ threats towards Iran,” said Kelvin Wong, senior market analyst at OANDA.
Further weighing on prices, the U.S. dollar index hovered near its highest level in more than a week. A stronger greenback typically curbs demand for oil from non-U.S. buyers by making crude more expensive in local currency terms.
Supply dynamics were also in focus. Russia’s Deputy Prime Minister Alexander Novak said on Tuesday that the country has ample fuel supplies and is even running a surplus, adding that Russia’s oil products market stabilised last autumn.
Separately, Trump announced a trade agreement with India that cuts U.S. tariffs on Indian goods to 18% from 50%, in return for India halting purchases of Russian oil and lowering trade barriers.
“Overnight, the U.S. and India agreed on a trade deal … if we do see this happen, it will only lead to a further increase in the amount of Russian oil floating at sea,” ING analysts said in a note.
Trump revealed the deal on social media following a call with Indian Prime Minister Narendra Modi, noting that India had agreed to buy oil from the U.S. and potentially from Venezuela as well.
Looking ahead, analysts expect continued volatility. “Looking ahead into February, prices are likely to remain choppy and range-bound … (they) are expected to stay highly reactive to headlines and macro cues rather than a decisive trend, with risk skewed to the downside,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.
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