Oil prices edged lower on Tuesday as traders weighed the risk of potential supply disruptions, with attention still firmly on rising tensions between the United States and Iran following new U.S. guidance for ships passing through the Strait of Hormuz.
Brent crude futures slipped 24 cents, or 0.35%, to $68.80 a barrel by 10:02 GMT, while U.S. West Texas Intermediate fell 30 cents, or 0.47%, to $64.06.
“The market is still focused on the tensions between Iran and the U.S., but unless there are concrete signs of supply disruptions, prices will likely start going lower,” said Tamas Varga, an oil analyst at brokerage PVM.
“The market is range-bound, it’s an oversupplied market against geopolitics,” he added.
Oil prices had climbed more than 1% on Monday after the U.S. Department of Transportation’s Maritime Administration advised U.S.-flagged commercial vessels to keep as far away as possible from Iranian territorial waters and to verbally refuse permission if Iranian forces attempt to board them.
Roughly one-fifth of the world’s oil consumption flows through the Strait of Hormuz, the narrow waterway between Oman and Iran, meaning any escalation in the region poses a significant threat to global energy supplies.
Iran, along with fellow OPEC members Saudi Arabia, the United Arab Emirates, Kuwait and Iraq, exports the bulk of its crude through the strait, primarily to Asian markets.
The U.S. guidance came despite Iran’s top diplomat saying last week that Oman-mediated nuclear talks with Washington had got off to a “good start” and were expected to continue.
Goldman Sachs analysts said in a note on Tuesday that oil prices continue to find support from geopolitical risks, pointing to increased oil volumes on vessels as buyers look to secure supplies amid heightened uncertainty.
“While talks in Oman produced a cautiously positive tone, lingering uncertainty over potential escalation, sanctions tightening, or supply disruptions in the Strait of Hormuz has kept a modest risk premium intact,” said Tony Sycamore, an analyst at IG.
Meanwhile, the European Union has proposed expanding its sanctions on Russia to include ports in Georgia and Indonesia that handle Russian oil, according to a proposal document seen by Reuters. This would mark the first time the bloc has targeted ports located in third countries.
The move forms part of broader efforts to tighten restrictions on Russian oil exports, a crucial source of revenue for Moscow amid the ongoing war in Ukraine.
Separately, traders said Indian Oil Corp purchased six million barrels of crude from West Africa and the Middle East, as India reduced its reliance on Russian oil while pushing ahead with trade talks with the United States, which both sides aim to conclude in March.