Iranian Diplomacy Hopes Weigh on WTI Oil Prices

WTI Oil prices continued their decline on Tuesday, settling at around $89.50 per barrel, near a two-week low. The sell-off was triggered by news that Iran may reopen the Strait of Hormuz within seven days if Washington eases military pressure and lifts its blockade of Iranian ports. US President Donald Trump confirmed this development, stating that 'the Iran meeting went very well' and describing it as 'very productive'. Another meeting between US officials and an Iranian delegation is scheduled to take place in the near future.

The reopening of the Strait of Hormuz would be a significant development for global oil markets. Currently, only two commodity vessels have crossed the waterway this week, down from 10 on Sunday and far below the roughly 125 large commercial vessels per day seen before the Iran war. Analysts at Commerzbank note that hopes for new diplomatic efforts to end the conflict with Iran and rising oil shipments from Saudi Arabia are putting pressure on oil prices.

Saudi Arabia appears to be trying to compensate for the loss of oil shipments via the East-West Pipeline to the Red Sea, which was damaged following a missile attack. The bank highlights that approximately 14 million barrels of crude oil were loaded onto seven very large crude carriers (VLCCs) at export terminals in the Gulf on Sunday.