Oil prices slipped on Tuesday as renewed diplomatic efforts to de-escalate the US-Israeli war on Iran fueled hopes of easing supply disruptions. However, continued attacks on Saudi Arabia kept Brent crude close to a six-month high.
Brent crude futures dropped 66 cents, or 0.57%, to $115.15 per barrel, while US West Texas Intermediate (WTI) crude fell 44 cents, or 0.43%, to $101.32 as of 0000 GMT.
Brent crude surged above $117 a barrel last week, its highest level since April, following a series of Iranian attacks on tankers near the strait. Prices touched $117 again on Monday.
According to analysts, it remained difficult to assess how the war would unfold. During the initial phases of the war, the market speculated the US administration to avoid crossing certain economic thresholds. Seven months later, many of those thresholds were crossed while a clear exit strategy remained elusive.
Another claimed oil prices could rise to $120 a barrel if attacks on vessels in the Middle East escalate. Conversely, prices could slip towards $80 a barrel if exports return to normal levels. Shipping risks have become a key driver of oil prices, with energy market scrambling to strike a balance between pricing and stock.
Attacks on Saudi Arabia continue as of Tuesday as the Saudi led coalition confirmed intercepting drones and missiles targeting the kingdom’s Eastern province and Riyadh.
The Houthis have also claimed latest attacks on the East-West oil pumping stations, although Saudi Arabia has not confirmed the strikes.
Earlier on Monday, Saudi Aramco senior officials in a joint statement along side Singapore announced storing crude oil in underground ravens. From 2027, the state-run oil company has decided to store its crude oil in rock ravens in Singapore to battle uncertainties,