But Crux Investor warns that fundamentals are woefully being overlooked: File Image/Pixabay.

Short-sighted oil traders on Tuesday once again rekindled  their hopes that the Strait of Hormuz could reopen, based on Iran stating that it had resumed talks with Oman on managing the strategic waterway – even though part of the U.S.’s mandate and that of other Middle Eastern countries is to have clear and unmanaged access to the strait.

As a result, West Texas Intermediate settled down 3.1 percent at $82.36 per barrel, and Brent fell 3.9 percent to $88.58.

As for Washington stepping up economic pressure on the Islamic republic, some analysts hoped this would force Iran back to the negotiating table, while hawks thought it might cause a complete collapse of the governing regime.

An example of the former was Scott Shelton, branch manager and energy specialist at TP ICAP, who wrote in a note, “Some signs of diplomacy out here in what is a long market and likely making it worse as Pakistan is delivering a peace offer to Iran and the U.S. is returning staff to their posts in the Middle East.”

A delegation from Pakistan left Iran Tuesday after talks with that country’s president on reopening the Hormuz and reviving negotiations to end the Iran-U.S. conflict, according to the Pakistani military.

Shelton added, “The near term looks like the U.S. Treasury has bought some time for the oil market in terms of generating enough fear to end the buying for now from speculators.”

Crux Investor was baffled by Tuesday’s substantial oil price losses in the face of challenging fundamentals, and analyst Ryan Charles wrote  that “Supply-side offsets are already close to exhausted: the US Energy Information Administration forecasts record 2026 production of 13.8 million barrels per day (bpd), the most bullish of its eight monthly outlooks this year, rising to 14.15 million bpd in 2027…but OPEC+ approved only a final 188,000 bpd increase for September, the last scheduled for the year, having already unwound close to all of the 3.5 million bpd in cuts it announced in 2023.

“Many members cannot reach their existing quotas, and the EIA sees OPEC spare capacity falling toward 600,000 bpd by the end of 2027, against a historical norm above 3 million bpd.”

Charles also argued that the recently disclosed U.S. 17.4 million barrel commercial crude build in the week to August 7 was not slack in the system: “The SPR fell 6.1 million barrels over the same week, meaning the tanks are filling because the reserve is being drawn down, not because new barrels are arriving.”