Shafaq News
Oil pricesfell on Tuesday, reversing gains in the previous session, on expectationspeace talks between the U.S. and Iran will take place this week and allow moresupply to flow from the key Middle East producing region.
Brent crudefutures declined 54 cents, or 0.6%, at $94.94 a barrel at 0300 GMT. U.S. WestTexas Intermediate (WTI) for May fell $1.11, or 1.2%, to $88.50. The Maycontract expires on Tuesday and the more-active June contract was down 76 cents, or 0.9%,at $86.66.
Bothbenchmarks surged on Monday, with Brent up 5.6% and WTI up 6.9%, after Iranagain shut the Strait of Hormuz, closingthe key oil transport artery, and the U.S. seized an Iranian cargo ship as partof its blockade of the country's ports.
Still,investors are focusing on the likelihood talks this week will result in the extension of theexisting ceasefire or a final agreement, though the chance of further conflictand disruptions to oil flows remains.
"Whileenergy markets popped higher yesterday following Iran's decision to reverse itsopening of the Strait of Hormuz, they're still trading in a manner whichsuggests optimism over U.S.-Iran talks," said ING analysts in a note.
"But webelieve markets are underpricing the ongoing supply disruption. Optimismappears to be clouding the reality of thesupply shock."
Iran isweighing participation in peace talks in Pakistan, a senior Iranian officialtold Reuters on Monday, followingIslamabad's efforts to end the U.S. blockade.
The blockadehas posed a major hurdle to Tehran rejoining peace efforts, with the current two-weekceasefire set to expire this week.
"Wecontinue to lean toward an MOU being signed and/or the ceasefire being extendedthis week, potentially evolving into a broader agreement," Citi analystssaid in a note. "That said, we remain prepared to pivot toward a moreprotracted disruption scenario should negotiations falter this week."
Underscoringthe uncertainty around the talks, the Iranian official stressed that nodecision has been made to attend, as Iranian Foreign Minister Abbas Araqchi said"continued violations of the ceasefire" by the U.S. is ahindrance to further negotiations.
Separately,Iran's top negotiator and Speaker of Parliament Mohammad Baqer Qalibafreiterated that Tehran would not negotiate under threats.
Shippingactivity through the Strait of Hormuz, a corridor for about one-fifth of theworld's oil supply, remained limited on Monday.
Ifdisruptions to the strait persist for another month, total lossescould rise to about 1.3 billion barrels, with prices likely near $110 a barrelin the second quarter of 2026, Citi said.
Kuwaitdeclared force majeure on oil shipments due to the strait's blockade, BloombergNews reported.
The higherprices caused by the closure of the strait have cut oil demand by about 3% so far,analysts at Societe Generale said ina client note.
The risk is"skewed toward larger losses the longer normalisation is delayed," itsaid, adding it expects "full normalisation" to supply only by late 2026.
(Reuters)
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