Oil prices extended their sharp decline on Tuesday falling as much as 5% as optimism over a possible diplomatic breakthrough between the United States and Iran continued to ease fears of prolonged supply disruptions in the Middle East, despite lingering uncertainty over whether any agreement is actually within reach. The latest sell-off came as traders increasingly priced in the possibility of reduced geopolitical risks, even as Tehran insisted that no formal negotiations were taking place.
As at the time of writing 08:25 a
p.m. (WAT), Brent crude was trading at $79.39 per barrel, down 5.23%, while US West Texas Intermediate (WTI) crude stood at $75.86 per barrel, a decline of 5.58%.
The renewed weakness in crude prices followed comments from US Treasury Secretary Scott Bessent and Qatar's Foreign Ministry suggesting that progress was being made on a draft framework aimed at ending the conflict between Washington and Tehran. The optimism came days after US President Donald Trump announced he had suspended plans for further military strikes on Iran while diplomatic efforts continued.
Market sentiment, however, remained mixed after Iran rejected claims that negotiations with the United States were underway. Tehran maintained that no meetings had been scheduled, leaving traders to weigh diplomatic optimism against the continued risk of fresh military escalation across one of the world's most critical oil-producing regions.
Adding to pressure on the market, the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) confirmed that the remaining members implementing voluntary production cuts would increase collective output by 188,000 barrels per day in September, completing the phased unwinding of the 1.65 million barrels per day cuts first announced in 2023.
Meanwhile, President Trump intensified pressure on major US oil companies, accusing them of profiting excessively from higher fuel prices during the Middle East conflict. The US president singled out industry giants including ExxonMobil and Chevron, urging refiners and retailers to reduce pump prices immediately and accusing them of failing to pass lower crude prices on to consumers. Despite the recent decline in oil prices, average US petrol prices remain elevated at about $4.08 per gallon, roughly 30 per cent higher than a year ago.
Several developments across global energy markets also shaped investor sentiment. Saudi Aramco reported a 33 per cent surge in second-quarter profits to $33.4 billion as higher oil prices offset lower production volumes. Abu Dhabi National Oil Company (ADNOC) announced plans to abandon its Murban futures pricing mechanism in favour of the Platts Dubai benchmark from November, while Nigeria's Dangote Petroleum Refinery reportedly advanced plans to launch what is expected to become Africa's largest initial public offering in October.
Supply risks nevertheless remain elevated. Shipping through the Strait of Hormuz continues to face security threats, with reports of another vessel being struck near Oman's Al Khasab on Tuesday. Although tanker movements through Hormuz and the Bab el-Mandeb Strait have not collapsed, heightened security concerns, longer shipping routes and rising insurance costs continue to support a geopolitical premium in global oil markets.
Elsewhere, Saudi Arabia and Iraq are pursuing alternative export strategies, Qatar has resumed work on its North Field East LNG expansion, and Russia's crude exports have slipped below four million barrels per day as domestic refinery activity recovered. Analysts say these competing supply and geopolitical factors could keep oil markets volatile in the coming weeks, even as traders continue to monitor diplomatic developments between Washington and Tehran.