Oil prices edged lower on Tuesday, hovering around one-week lows amid hopes for a resolution in the US-Iran war, while subdued flow through the Strait of Hormuz and further supply disruption risks underpinned the market.
Brent crude futures were down 50 cents, or 0.57%, at $87.86 by 0610GMT. US West Texas Intermediate crude was at $82.24 a barrel, down 37 cents, or 0.45%. Both contracts slid around 8% in the prior session and hit their lowest since July 20 after the US abruptly suspended a campaign of air strikes against Iran over the weekend.
US President Donald Trump said on Monday Washington was having "good talks" with Iran and that there was the chance of a resolution.
However, he said US strikes would resume if negotiations failed while Iran issued similar comments about retaliation.
"For now, the relief that an off-ramp has been found has taken the heat out of prices. However, the situation remains highly fluid," IG analyst Tony Sycamore said in a client note.
Also weighing on oil prices was news the Caspian Pipeline Consortium's Black Sea terminal on the Russian coast had resumed oil loadings, after a one-week stoppage following Ukrainian drone attacks.
Still, analysts warned the risks to supply disruptions spreading to the Red Sea remain elevated after Saudi Arabia said it shot down drones aimed at petroleum targets, including in Riyadh. It said Iran-backed armed groups had launched the weapons from Iraq, and it reserved the right to respond.
Barclays analysts said in a note on Monday "flows through the strait remain subdued". They said, in the week ended July 24, crude oil and refined product net exports through the strait averaged 2.9 million barrels a day compared with 5.9 million in the previous week.
Elsewhere, US crude oil stockpiles likely fell last week alongside gasoline, while distillate stocks likely rose, a preliminary Reuters poll showed on Monday.
