NEW YORK: Oil prices fell about 4% in volatile trade on Tuesday, as two vessels passed through the Strait of Hormuz and the United States said the ceasefire with Iran remained in place despite exchanges of fire.
After jumping about 6% in the prior session, Brent futures fell US$4.57, or 4%, to settle at US$109.87 a barrel, while US West Texas Intermediate crude fell US$4.15, or 3.9%, to settle at US$102.27.
"The complex may have seen some selling related to optimistic comments from the Trump Administration regarding the continued ceasefire with Iran," analysts at energy advisory firm Ritterbusch and Associates said in a note.
"But today’s price weakness looked more like a technical correction following a strong ... Brent price advance during the past week," Ritterbusch noted.
The United Arab Emirates said it was under attack from Iranian missiles and drones on Tuesday, even as Washington said a shaky ceasefire was intact and U.S. Defense Secretary Pete Hegseth said the US had secured a path through the Strait of Hormuz. Iran denied it attacked the UAE in recent days.
Hegseth said hundreds of ships were lining up to pass through the critical waterway. Before the US and Israel attacked Iran on February 28, about 20% of global oil supplies passed through the strait daily.
The US military said two US merchant ships made it through the strait, without saying when, with the support of Navy guided-missile destroyers. Iran denied any crossings had taken place, though shipping company Maersk MAERSKb.CO said the Alliance Fairfax, a US-flagged ship, exited the Gulf under US military escort on Monday.
UN Security Council members will begin talks on Tuesday on a US- and Bahrain-backed draft resolution that could lead to sanctions against Iran, and potentially authorize force, if Tehran fails to halt attacks and threats to commercial shipping in the Strait of Hormuz, three Western diplomats said.
US President Donald Trump dismissed Iran's military capability on Tuesday and said Tehran "should wave the white flag of surrender," noting Iran's military has been reduced to firing "peashooters" and that Tehran privately wants to make a deal.
The US military said it destroyed six Iranian small boats, as well as cruise missiles and drones, after Trump sent the navy to escort stranded tankers through the strait in a campaign he called "Project Freedom."
South Korea is reviewing whether to join Trump's plan to help ships transit through the strait, an official said on Tuesday, following an explosion and fire on a Korean-operated ship in the waterway.
The oil market awaited direction from weekly storage reports from the American Petroleum Institute trade group later on Tuesday and the US Energy Information Administration on Wednesday.
Analysts estimated energy firms pulled 3.3 million barrels of crude from storage during the week ended May 1.
If correct, that would be the first time energy firms pulled crude out of storage for two weeks in a row since January. It compares with a decrease of 2 million barrels in the same week last year and an average decline of 2.3 million barrels over the past five years (2021 to 2025). — Reuters
