Crude Oil Price: On Tuesday, there was some softening in crude oil prices in the international market. There is little hope for a resolution to the ongoing war in the Middle East. Due to this, the threat of oil supply disruption was somewhat reduced. However, Brent crude is still near its six-month peak. The main reason for this is the recent attacks on Saudi Arabia, which have dashed hopes of an immediate return to peace in the region. Brent crude futures were down $1, or 0.94 percent, at $114.72 a barrel around 8 a.m. Tuesday. At the same time, American West Texas Intermediate (WTI) crude was trading down 93 cents, or 0.92 percent, at $100.83 a barrel.

The meeting in Tehran changed the game

The drop in oil prices comes after a major diplomatic initiative taken on Monday. Saudi Arabia, Turkey, Pakistan held talks with Iranian officials in Tehran on Monday to defuse rising tensions in the Middle East. Saudi Arabia says the purpose of the visit is to keep communication channels open, to prevent military tensions from escalating again. According to Iranian state media, the four countries have agreed to continue talks to increase cooperation on peace-related issues. This hope of a resolution to the dispute eased fears of a supply cut from the market, putting downward pressure on prices.

Hopes for peace have been undermined by attacks by Houthi rebels

Although negotiations are underway at the diplomatic level, the situation on the ground remains fragile. Oil prices have not seen a big drop as the scope for peace still looks very weak. Iran-backed Houthi rebels have resumed attacks on oil-producing Saudi Arabia. These attacks have kept the market nervous.

The Strait of Hormuz has become the epicenter of the crisis

The effects of this entire war are being seen outside the Middle East as well. The Strait of Hormuz has come to the center of all this chaos. Before the war broke out in February, a fifth (20 percent) of the world’s energy supply passed through this narrow strait.

According to data from a Washington think tank, October has been the worst month for attacks on merchant ships in or around the Strait of Hormuz. The organization has been monitoring incidents related to maritime security worldwide since 2017. Last week saw a series of Iranian attacks on tankers in the area. After this, the price of Brent crude crossed $117 per barrel, the highest level since April. Brent touched the level of 117 dollars on Monday as well.

Russia increased diesel production

On the one hand, the oil market is troubled by the crisis in the Middle East, on the other hand, a different news has come from Russia. Russian refineries are ramping up diesel production in October, according to two industry sources familiar with the matter. The Kremlin has a supply agreement with the US. After this agreement, the Russian government has allowed export quotas, which has intensified production there.