Oil Extends Decline on Hopes for US-Iran Talks; WTI Drops Below $82

Oil extended its decline as hopes grew for talks between the US and Iran to end the conflict.

On July 27, Bloomberg reported that West Texas Intermediate fell below $82 a barrel after plunging more than 7% a day earlier. Brent crude, which logged its biggest drop in more than three months in the previous session, finished trading near $88 a barrel.

President Donald Trump said on July 27 that the US and Iran are holding talks aimed at ending the Middle East conflict. Axios reported that Trump had decided to temporarily halt airstrikes on Iran to give diplomacy another chance. It remains unclear, however, whether substantive negotiations are actually underway between the two countries.

Oil prices surged earlier this month as clashes between the US and Iran escalated again and tensions spread to the Red Sea. They have since surrendered part of those gains as military tensions eased.

Still, concerns over crude supply persist because tanker traffic through the Strait of Hormuz has yet to return to normal.

“I don’t think the Middle East issue has been resolved,” Scott Shelton, an energy specialist at TP ICAP Group, said. “We need clear evidence that oil is actually moving through the Strait of Hormuz, but we haven’t seen that yet.”

Iran and Oman are currently discussing the resumption of vessel traffic through the Strait of Hormuz. Officials from the two countries have continued talks after meeting in Tehran over the weekend. If they reach an agreement on passage through the strait, it could pave the way for renewed ceasefire talks between Washington and Tehran.