Oil prices fell on Tuesday as investors assessed a pause in U.S. strikes on Iran, raising hopes for diplomacy and easing concerns over disruptions to Middle East oil supplies.
Brent crude futures fell $0.54, or 0.6%, to $87.82 a barrel by 0046 GMT. U.S. West Texas Intermediate crude dropped $0.66, or 0.8%, to $81.95. Both benchmarks were down about 1% earlier, hitting their lowest levels in more than a week.
U.S. President Donald Trump said on Monday the United States was having "good talks" with Iran and that a deal was possible, but warned strikes would resume if negotiations failed. Iran also said it would retaliate if talks collapsed.
"For now, the relief that an off-ramp has been found has taken the heat out of prices," IG analyst Tony Sycamore said.
Yemen's foreign minister-designate Afrah al-Zouba said the Iran-aligned Houthis sought greater control over shipping through Bab el-Mandeb. Marex analyst Edward Meir said tanker traffic through the Red Sea and Strait of Hormuz had fallen sharply, though he questioned the Houthis' ability to enforce a full blockade.
Barclays said crude and refined product exports through the Strait of Hormuz averaged 2.9 million barrels a day in the week to July 24, down from 5.9 million barrels the previous week.
A preliminary Reuters poll showed U.S. crude and gasoline inventories likely fell last week, while distillate stocks probably rose.
Oil prices had tumbled more than 10% on Monday after Trump paused strikes and said Washington was holding "good talks" with Tehran, sharply reducing the geopolitical risk premium in crude markets.
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