Oil slips on hopes US-Iran talks likely to proceed, boosting supply

Brent futures ​declined 95 cents, or 1%, at $94.53, as of 0003 GMT while US West Texas Intermediate (WTI) crude futures ‌for May fell $1.54, or 1.72%, to $88.07

Oil prices fell on Tuesday, reversing gains in the previous session, on expectations peace talks between the US and Iran will take place this week and allow ​more supply to flow from the key West Asia producing region.

Brent futures ​declined 95 cents, or 1 per cent, at $94.53, as of 0003 GMT. US West Texas Intermediate (WTI) crude futures ‌for May fell $1.54, or 1.72 per cent, to $88.07. The May contract expires on Tuesday and the more-active June contract was down $1.09, or 1.3 per cent, at $86.37.

Both benchmarks surged on Monday, with Brent up 5.6 per cent and WTI up 6.9 per cent, after Iran again shut the Strait of Hormuz, closing the key oil transport artery, and the US seized an Iranian cargo ship as part of its blockade of the country's ports.

 

Still, investors are focusing on the likelihood talks this week will result in the extension of the existing ceasefire or a final agreement, though the chance of further conflict and disruptions to oil flows remains.

Iran is weighing participation in the peace talks in Pakistan, a senior Iranian official told Reuters on Monday, ‌following Islamabad's efforts to end the US blockade.

The blockade has posed a major hurdle to Tehran rejoining peace efforts, with the current two-week ceasefire set to expire this week.

"We continue to lean toward an MOU being signed and/or the ceasefire being extended this week, potentially evolving into a broader agreement," analysts at Citi said in a note. "That said, we remain prepared to pivot toward a more protracted disruption scenario should negotiations falter this week."

Underscoring the uncertainty around the talks, the Iranian official stressed that no decision has been ​made to attend, as Iranian Foreign Minister Abbas Araqchi said "continued violations of the ceasefire" by the US is a ‌hindrance to further negotiations.

Separately, Iran's top negotiator and parliament speaker Mohammad Baqer Qalibaf reiterated that Tehran would not negotiate under threats.

Shipping activity through the Strait of Hormuz, an essential corridor for about ​one-fifth of the ‌world's oil supply, remained limited on Monday.

If disruptions to the strait persist for another month, total losses could ‌rise to about 1.3 billion barrels, with prices likely near $110 a barrel in the second quarter of 2026, Citi said.

Kuwait declared force majeure on oil shipments due to the strait's blockade, Bloomberg News reported.

The ‌higher ​prices caused by ​the closure of the strait have cut oil demand by about 3 per cent so far, analysts at Societe Generale said in a client note.

The risk is "skewed toward larger losses the longer normalisation ‌is delayed," it said, ​adding it expects "full normalisation" to supply only by late 2026.