Oil prices moved lower on Tuesday, giving back part of the previous session’s gains as traders assessed conflicting reports regarding negotiations between Washington and Tehran.
The market remained focused on diplomatic developments after U.S. President Donald Trump said talks with Iran were continuing, despite earlier reports from Iran’s Tasnim news agency indicating that Tehran had paused indirect discussions with the United States.
At 0649 GMT, Brent crude futures were down 53 cents, or 0.56%, at $94.45 per barrel, while U.S. West Texas Intermediate crude declined 56 cents, or 0.61%, to $91.60 per barrel.
Both oil benchmarks had rallied by more than 5% on Monday. However, they still ended May with losses exceeding 16%, as hopes for a diplomatic breakthrough had previously weighed on prices.
Diplomatic Uncertainty Remains the Key Market Driver
Analysts said the lack of clarity surrounding negotiations continues to dominate sentiment in energy markets.
“While markets had hoped to move past the uncertainty amid prospects of a potential deal, nothing appears to have changed for oil as of this morning,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.
Speaking to CNBC on Monday, Trump initially said he was unconcerned if negotiations had come to an end. Shortly afterward, however, he posted on social media that discussions with Iran were still taking place and later told ABC News that he anticipated a deal that would extend the ceasefire and reopen the Strait of Hormuz “over the next week”.
According to Tim Waterer, chief market analyst at KCM Trade, traders are closely monitoring every development linked to the negotiations.
“The market is currently focused on whether there’s any concrete progress or setbacks in U.S.-Iran negotiations, the tone and substance of statements from both sides (particularly Iran’s threats regarding the Strait of Hormuz), and actual physical tanker movements through the waterway,” Waterer said.
He noted that the presence or absence of diplomatic progress will play a crucial role in determining oil’s near-term direction.
“The status of the U.S.-Iran negotiations at any given point will ultimately determine whether the current risk premium stays embedded in oil prices or starts to unwind,” Waterer added.
Regional Developments Continue to Influence Supply Concerns
Investors also monitored broader developments across the Middle East.
Lebanon announced a partial ceasefire between Israel and Hezbollah on Monday, representing a limited easing of tensions within a conflict that has contributed to the wider confrontation involving Iran.
Since hostilities began, Iran has effectively restricted most non-Iranian shipping traffic through the Gulf, disrupting roughly 20% of global oil and liquefied natural gas flows.
Those disruptions have helped push energy prices sharply higher, with crude prices rising more than 50% from levels seen before the conflict erupted.
Demand for U.S. Crude Reaches New Highs
Supply concerns in the Middle East have increased demand for American crude exports.
According to ship-tracking estimates released on Monday, U.S. crude exports reached a record 5.6 million barrels per day in May, driven by stronger demand from refiners in Europe and Asia seeking alternative sources of supply.
The increase highlights the growing role of U.S. producers in helping offset disruptions elsewhere in the global energy market.
Inventory Figures Suggest Continued Tightness
Traders are also watching U.S. inventory data for signs of supply conditions tightening further.
A preliminary Reuters survey published on Monday showed that U.S. crude inventories are expected to have declined by approximately 3.6 million barrels in the week ended May 29, extending the draw recorded during the previous week.
The survey also indicated that gasoline and distillate stockpiles likely decreased over the same period.
Shipping Industry Calls for Clear Hormuz Framework
Shipping executives gathered in Athens on Monday to discuss the impact of the conflict on global trade routes and energy transportation.
Industry leaders said that any future agreement between the United States and Iran would need to include clear guidelines governing commercial transit through the Strait of Hormuz before shipping companies could confidently resume normal operations.
Given the waterway’s importance to global oil and gas exports, markets are expected to remain highly sensitive to any developments affecting access to the Strait and the broader stability of regional energy supplies.
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