Oil prices extended their sharp retreat in Asian trading on Tuesday after tumbling more than 9% overnight, as hopes for renewed talks between the United States and Iran eased fears of a broader disruption to Middle East crude supplies.

As of 20:44 ET (00:44 GMT), Brent Oil Futures slipped 0.6% to $87.85 a barrel, while Crude Oil WTI Futures fell 0.8% to $81.96 a barrel after plunging more than 9% in the previous session.

The latest losses came as investors continued to unwind last week’s rally, with signs of de-escalation prompting traders to scale back bets that the conflict would severely disrupt global oil exports.

Crude has reversed sharply over the past two sessions after briefly pushing Brent above $100 a barrel last week, as traders increasingly bet the worst of the Middle East conflict may have passed.

Sentiment improved after President Donald Trump said Washington and Tehran were engaged in talks aimed at ending the conflict, following his decision to suspend further U.S. strikes and allow negotiations another opportunity.

Iran also halted retaliatory attacks after the U.S. pause, while reports indicated China had been working to revive diplomatic efforts between the two sides.

IG senior market analyst Tony Sycamore said the more than 9% selloff reflected growing confidence that an off-ramp to the conflict had emerged, easing immediate fears over attacks on Middle East energy infrastructure.

However, he cautioned that the pause remained fragile and that markets were still waiting for concrete evidence of lasting diplomatic progress before fully pricing out geopolitical risks.

Shipping disruptions still cloud supply outlook
Despite improving sentiment, Sycamore noted there has been little meaningful recovery in tanker traffic through the Strait of Hormuz, while flows through the Bab el-Mandeb Strait also remain well below normal.

He added that markets will be closely watching whether negotiations can deliver greater clarity over navigation through the Strait of Hormuz, with any breakdown in talks - or renewed attacks on Saudi export infrastructure - likely to rebuild the geopolitical risk premium in crude prices.

Negotiators from Iran and Oman are continuing discussions aimed at restoring shipping through the strategically vital waterway, which normally carries around a fifth of global oil flows.

A successful agreement could pave the way for broader U.S.-Iran talks, although uncertainty over the durability of the diplomatic pause continues to keep traders on edge.

Elsewhere, supply concerns eased after Kazakhstan’s main oil export terminal resumed loadings following disruptions caused by Ukrainian drone attacks.

Two tankers began loading at the Caspian Pipeline Consortium terminal near the Russian port of Novorossiysk, according to Kazakhstan’s energy ministry, adding to expectations that global crude supplies could improve.

Source: Investing.com

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