NEW YORK: Oil prices fell about 3% to a seven-week low on Tuesday after Iran and Israel said they had halted attacks on each other following an appeal from US President Donald Trump.
Trump said Iran shot down a US helicopter in the Strait of Hormuz and he threatened that Washington would respond. Oil prices bounced off session lows following his remarks.
Brent futures fell US$2.80, or 3.0%, to settle at US$91.45 a barrel. US West Texas Intermediate (WTI) crude slid US$3.10, or 3.4%, to settle at US$88.20. It was the lowest settlement for Brent since April 17 and for WTI since May 29. It was also the first time since January that Brent closed below its 100-day moving average of technical support.
"The oil market is drafting lower ... as the latest shooting match between Israel and Iran was in favour of a ceasefire and as Trump continues to talk the market lower by suggesting that an end of the war with Iran could be reached in 2-3 days with negotiations in their final stages," analysts at energy advisory firm Ritterbusch and Associates said in a note.
On Monday, Israel and Iran halted direct attacks on each other after Trump urged them to stop. Tehran said it would resume hostilities if Israel continued to attack the Hezbollah militia in Lebanon. Iran has so far held back from attacking even though Israel struck the historic port city of Tyre in southern Lebanon, killing at least eight people.
Iran, meanwhile, continued to block most shipping through the Strait of Hormuz, which before the war carried a fifth of the world's crude oil and liquefied natural gas. Washington has imposed its own blockade of Iranian ports.
US Energy Secretary Chris Wright said on Tuesday that ship traffic in the Gulf and oil exports through the Strait of Hormuz are rising even as Washington and Tehran struggle to reach a deal on ending their more than three-month-old war.
Elsewhere around the world, China's May crude imports slumped 29% to their lowest level in eight years, extending a sharp decline in the world's largest oil importer that is helping keep a lid on global oil prices.
The US Energy Information Administration (EIA) projected the Iran war would slash world petroleum production to an average of 99.0 million barrels per day (bpd) in 2026, down from a record 106.1 million bpd in 2025. EIA also forecast that world oil demand would slide to 102.9 million bpd in 2026 from a record 104.0 million bpd in 2025.
The agency said countries would pull any barrels they needed from storage, cutting inventories in the Organization for Economic Co-operation and Development (OECD) to their lowest level since at least 2003, when EIA's dataset began.
Looking ahead, the oil market awaited weekly storage reports from the American Petroleum Institute (API) trade group on Tuesday and the EIA on Wednesday.
Analysts estimated energy firms pulled 4.0 million barrels of crude from US storage during the week ended June 5. If correct, that would be the first time since January 2025 that energy firms pulled crude out of storage for seven weeks in a row.
Inventories declined by 3.6 million barrels in the same week last year. — Reuters
