Oil fell for a second session on Tuesday as markets bet the US and Iran may reach a diplomatic settlement. Traders are weighing that hope against continued US strikes and attacks on commercial ships in Gulf waters.
Crude oil prices fell Tuesday for a second consecutive session, as the market hopes the US and Iran will reach a settlement to the conflict that has disrupted global energy supplies for eight months. West Texas Intermediate futures were 42 cents lower at $96.04 a barrel after dipping below $95 earlier.
The move followed rumors that the two countries were making progress toward a deal. Brent crude futures, the international benchmark, were down $1.23 at $103.54 a barrel.
Diplomacy drives the selloff
Oil sold off more than 7% on Monday after Washington and Tehran signaled they were both open to discussions. Qatar is continuing to mediate, and its foreign ministry said a delegation held talks in Tehran to prevent further escalation.
The Financial Times reported that Monday's drops came after Iranian President Masoud Pezeshkian said the supreme leader had granted the government "certain authorities" in negotiations. The FT added that traders pointed to an unconfirmed report in the Al-Araby Al-Jadeed news outlet that both sides had made concessions.
Strikes and ship attacks continue
Yet the situation remains volatile. Washington attacked Iran's Qeshm Island on Monday, US officials told The Wall Street Journal. Brent had traded above $107 earlier on Tuesday after those strikes, which American officials described as defensive.
Meanwhile, commercial ships continue to come under attack in the Persian Gulf, Strait of Hormuz and Gulf of Oman. The United Kingdom Maritime Trade Operations Centre has reported at least four attacks since the start of the month.
Midterms and inflation add pressure
Crude gained more than 10% in October as the market priced in the risk of escalation after the US midterm elections. High oil prices have contributed substantially to inflation and high gasoline prices in the US, a concern for Trump ahead of the vote.
Trump has ruled out a new wave of major strikes on Iran before Americans vote on Tuesday.
Sources: CNBC, Financial Times
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