Oil prices moved lower on Tuesday, giving back much of the previous session’s advance after Iran and Israel announced a halt to attacks following an appeal from U.S. President Donald Trump. However, both countries indicated that military action could resume if tensions escalate again.
By 0741 GMT, Brent crude futures had fallen $1.33, or 1.4%, to $92.92 a barrel, while U.S. West Texas Intermediate crude was down $1.73, or 1.9%, at $89.57 a barrel.
According to Tamas Varga, an analyst at PVM Oil Associates, the market has experienced similar moments before, where hopes of a breakthrough in the conflict raised expectations that the three-month-long war in the Middle East could be nearing an end.
Despite ongoing uncertainty, traders reacted to the latest statements from Tehran and Jerusalem indicating that attacks had ceased for the time being. The announcement followed a weekend marked by renewed Israeli strikes on Iran and military activity in Lebanon, developments that helped drive oil prices approximately 5% higher on Monday.
“In the meantime, global oil inventories keep depleting and as data, whether weekly or monthly, becomes available, realization of dangerously low oil stockpiles worldwide could intensify the race for available barrels pushing Brent back above $100 once again,” Varga said.
Supply concerns continue to provide underlying support to the market. Tehran has maintained restrictions on most shipping traffic through the Strait of Hormuz, a strategic waterway that handled roughly one-fifth of global crude oil and liquefied natural gas flows before the conflict began. At the same time, Washington has kept its blockade on Iranian ports in place.
Further pressure on oil prices came from weaker demand indicators in China. The country’s crude oil imports fell 29% last month to their lowest level in eight years. Imports in April dropped to a multi-year low of 9.3 million barrels per day, as refiners relied on existing inventories to offset a sharper decline from the average import level of 11 million barrels per day recorded before the U.S.-Israeli conflict with Iran.
Separately, the U.S. military reported on Monday that its forces disabled an empty oil tanker in the Gulf of Oman after the vessel attempted to reach an Iranian port in breach of the current blockade measures imposed against Iran.