Crude oil fell on Tuesday as traders hoped for diplomatic progress between the U.S. and Iran. Attacks on ships near the Strait of Hormuz and strikes on Saudi Arabia have escalated recently, and oil turned negative after an unconfirmed report of a U.S.-Iran compromise proposal.
Crude oil prices fell Tuesday as traders hoped for diplomatic progress between the U.S. and Iran, though attacks on tankers and strikes against Saudi Arabia have escalated recently.
WTI and Brent retreat from session highs
U.S. West Texas Intermediate futures for November were down 0.9% at $102.75 per barrel, after a session high of $110.48. The November contract expires on Tuesday, and the December contract was down 1% at $97.50 per barrel.
Brent crude futures for December delivery fell 1% to $108.31 per barrel, below a session high of $111.99. Investing.com reported that at 11:07 ET Brent dropped 2.3% to $106.99 and December WTI slipped 2.2% to $96.33.
An unconfirmed deal report meets fresh attacks
Investing.com said oil turned negative after an unconfirmed report that Qatar and Pakistan had offered a plan to the U.S. and Iran that met the demands of both sides. The New Arab, citing sources familiar with the mediation, said the proposal offers around $6 billion in frozen Iranian funds in Qatari banks as a partial response to Tehran's demands to unfreeze assets.
Meanwhile, attacks on commercial ships in the Strait of Hormuz have escalated in recent weeks. At least 18 vessels have come under fire over the past two weeks, according to ship tracker Kpler. Iran's Revolutionary Guard Corps said two oil tankers were set ablaze after hitting mines laid by its naval unit, Tasnim reported.
Tehran also warned Washington. According to Tasnim, Foreign Ministry Spokesperson Esmaeil Baqaei said Iran would respond to any American strike "in equal measure, if not more forcefully". U.S. President Donald Trump said earlier this month that American forces will not attack Iran before the midterm elections on Nov. 3.
Analyst points to tight supply
Tamas Varga, analyst at PVM Oil Associates, told CNBC that front-end WTI strength ahead of the contract expiry is a sign of tightness in the global crude oil market. He linked it to falling export volumes from the Middle East as tanker attacks and Houthi strikes on Saudi oil infrastructure intensify.
Varga added that U.S. commercial oil stocks are expected to have declined last week.
Sources: CNBC, Investing.com
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