Oil prices experienced a slight increase on Tuesday, though the upward movement was limited as market participants shifted their focus from relaxing Middle East geopolitical tensions toward rising global supplies and future demand.
Brent crude futures climbed 38 cents, or 0.5%, to reach $72.37 a barrel. Meanwhile, U.S. West Texas Intermediate crude increased by 30 cents, or 0.4%, to trade at $68.85 a barrel, following a previous session that closed near levels seen prior to the conflict with Iran.
“The steps towards recovery in supply have eased the immediate risk premium, but the market remains wary of putting too much faith in the stability of the current truce given the on again-off again nature of U.S.-Iran relations,” said Tim Waterer, chief market analyst at KCM Trade.
“We will be watching for early signs of demand response, particularly from China.
The market has priced in a lot of the positive supply news, so the next leg in oil prices will depend on whether physical reality matches the optimistic headlines,” Waterer added.
Political tensions lingered as President Donald Trump stated that the U.S. would either negotiate a deal with Iran or “finish the job,” reiterating potential military options as Tehran maintained a defiant stance following the funeral of former Supreme Leader Ayatollah Ali Khamenei.
Investors continue to track diplomatic discussions regarding commercial shipping access through the Strait of Hormuz alongside the stabilization of Gulf energy exports.
Security concerns were underscored by reports that Iran’s Revolutionary Guards launched at least two missiles at commercial vessels in the strait.
According to U.S. officials cited by Axios, the targeted ships sustained major damage, though no fatalities were reported.
Despite these risks, maritime traffic showed signs of resumption.
Shipping data revealed that Japanese-owned supertankers loaded with Saudi Arabian crude pushed toward the Strait of Hormuz to exit the Gulf, joining other previously delayed vessels.
However, analysts at ANZ noted that the normalization of energy logistics is progressing slower than anticipated.
“The initial rebound in tanker transits through the Strait of Hormuz has stalled, with vessel crossings remaining in single digits and no sustained recovery evident,” the ANZ analysts stated.
“While the interim U.S.-Iran agreement has reduced immediate geopolitical risks, shipping operators remain cautious, limiting the speed at which crude exports can return to normal levels.”
On the production side, supply volumes are expanding.
Following its departure from OPEC+ quotas, the United Arab Emirates boosted its June crude output past 3.8 million barrels per day, marking its highest production rate since April 2020.
Additionally, OPEC and allied producing nations agreed to expand their collective output targets by 188,000 barrels per day starting in August, built upon matching output hikes implemented for June and July.
In a major pricing shift, Saudi Arabia lowered its August official selling price for Arab Light crude bound for Asia to $1.50 a barrel below the Oman/Dubai benchmark.
This represents an $11 reduction from July, marking the kingdom’s sharpest price cut in over twenty years.
