Oil Prices Slide as Diplomatic Hopes Outrun Supply Disruptions

Oil prices slid on Tuesday as hopes of a deal between Iran and its Gulf state neighbors ran ahead of actual oil flows. The market has been booking profits after last week's run above $100 in Brent, but supply disruptions remain a concern. According to reports, Oman has presented a plan backed by Gulf states that would allow Iran to collect voluntary fees for use of the Strait of Hormuz under a joint regional arrangement.

The United States said it is having good talks with Iran, but market participants are skeptical about the plan's effectiveness. The barrels that were missing last week due to supply disruptions have not improved since then, and traffic through the Strait of Hormuz remains a fraction of normal levels.

The Red Sea is still under attack, and Saudi Aramco has shut down its 400,000 barrel-per-day Jazan refinery. The market is pricing in a deal that does not exist yet, while supply disruptions continue to drive prices up.