NEW YORK: Oil prices fell about 2percent to a two-week low on Tuesday on hopes tensions between the United States and Iran were easing after Iran’s foreign minister said the countries had reached an understanding on the main “guiding principles” of their nuclear talks.
Brent futures fell USD1.41, or 2.1percent, to USD67.24 a barrel at 11:50 a.m. EST (1650 GMT), while US West Texas Intermediate (WTI) crude fell 65 cents, or 1.0percent, to USD62.24 in volatile trading, putting both crude benchmarks on track for their lowest close since February 2.
Earlier in the session WTI prices rose more than USD1. Iran and the United States reached an understanding on the main “guiding principles” in a second round of indirect talks in Geneva over their nuclear dispute on Tuesday, but that does not mean a deal is imminent, Iranian Foreign Minister Abbas Araqchi said. The talks took place amid a US military buildup in the Middle East.
Iran’s supreme leader said on Tuesday that any US attempt to depose his government would fail. Oil prices are likely to stay volatile, with sharp two-way swings driven by diplomatic signals rather than pure demand-supply fundamentals, said Sugandha Sachdeva, founder of SS WealthStreet, a New Delhi-based research firm.
Investors are closely watching US-Iran relations as any escalation or conflict could lead to Iran closing the Strait of Hormuz.
About a fifth of the oil consumed globally passes through the Strait of Hormuz between Oman and Iran, making any disruptions in the area a major risk to global oil supplies.
Iran and fellow Organization of the Petroleum Exporting Countries (OPEC) members Saudi Arabia, United Arab Emirates, Kuwait and Iraq export most of their crude via the Strait, mainly to Asia.