Another day, another trading session of wild swings for oil prices as analysts on Tuesday tried to assess the implications of a fresh attack on Iran by the U.S. and traders clung to hopes of a possibility of peace between the two countries anyway.
As of 1544 GMT, Brent fell $1.63, or 2 percent, to $103.14 per barrel, and West Texas Intermediate fell 67 cents, or 1 percent, to $95.79.
Although Qatar's foreign ministry spokesperson said the U.S. and Iran remain committed to mediation efforts and are reviewing proposals aimed at bridging the differences in their demands and expectations, it remained profoundly uncertain whether the two sides would ever come to terms.
After Iran fired at a U.S. aircraft, the U.S. military on Monday struck Qeshm Island in the Strait of Hormuz, obliterating an anti-aircraft facility.
Meanwhile, Iranian security chief Mohsen Rezaei said Tuesday that "America's response to Iran's rights and demands was not convincing, and they must fully and explicitly address Iran's seven conditions and act upon them; only in this case will the Strait of Hormuz be reopened."
But the seven conditions, which include lifting the U.S. blockade against Iran, withdrawal of U.S. forces, war damage compensation, release of frozen assets, and a halt to U.S. threats and insults, have already been largely rejected by Washington.
ING said in a note that despite positive signals, “it's probably too early to think escalation risks have passed; what is clear, though, is that strong signals of progress in peace talks would mean more downside for prices.”
That downside could be influenced by developments in another part of the world: the Kremlin on Tuesday confirmed that Russia will hold three-way peace talks with Ukraine and the U.S. in Abu Dhabi from November 10 to 11.
As for the physical flow of crude amid the U.S./Iran war, Rystad Energy on Tuesday struck a pessimistic note by stating in a report that even if an agreement to end hostilities were achieved by both countries and Strait of Hormuz transit recovered, fundamental differences would remain.
The report stated, “Achieving a comprehensive settlement would require addressing issues related to Iran’s nuclear program, sanctions, Tehran-backed armed groups in the region, and the security of maritime shipping, while also taking into account Israel’s security interests…We consider it unlikely that all these points of contention can be resolved within the coming year.”
