Oil prices dip as mediation efforts offset US-Iran strikes

REUTERS -- Oil prices softened on Tuesday, with markets weighing ​reports of mediation efforts between the US and Iran against an exchange of ‌fresh attacks between the two and threats of a naval blockade of Saudi Arabia by Yemen’s Houthis.

Brent crude futures eased 35 cents, or 0.4%, to $88.87 per barrel by 0052 GMT, while US West Texas ​Intermediate crude for September delivery was steady at $82.47 a barrel.

Both contracts were ​trading below their highest levels in more than a month hit in ⁠the previous session.

Yemen’s Iran-aligned Houthis said on Monday they would impose a naval blockade on ​Saudi Arabia, opening a potential new front against the U.S. in its war on Iran ​and raising the threat to global energy supplies and trade beyond the Gulf.

“The threats of a naval blockade on Saudi Arabia by the Houthis are significant because they raise the risk of disruption to ​another major oil exporter,” said Tim Waterer, chief market analyst at KCM Trade.

Separately, a ​senior Iranian official told Reuters that Tehran had received a proposal from mediators for a 10-day ceasefire ‌in efforts ⁠to salvage an interim deal signed on June 17, intended to pave the way for a lasting agreement to end the war that began on February 28 with US-Israeli attacks on Iran.

The diplomatic push followed another night of US strikes on Iranian cities and attacks ​by Iran’s Revolutionary Guards ​on US military ⁠assets across the region. Later on Monday, US Central Command said it had begun another round of strikes on Iran.

“(Oil) has come a long ​way already and it certainly has the potential to go higher ​again. However, ⁠in the short term the overnight talk of de-escalation and peace talks appears to be capping the upside for the time being.

Whether anything comes from those peace talks remains to ⁠be ​seen,“ IG market analyst Tony Sycamore said in a ​note.

US crude oil stockpiles were expected to have fallen last week alongside gasoline, while distillate stocks likely rose, a ​preliminary Reuters poll showed on Monday.