Oil prices reversed course in Asian trading on Tuesday, paring earlier gains, following a report that US president Donald Trump told aides he was willing to end the American-Israeli war against Iran without reopening the Strait of Hormuz.
Brent crude futures for May were down $1.22, or 1.08 per cent, to $111.56 per barrel at 0210 GMT after rising 2 per cent earlier in the session. The May contract expires on Tuesday.
The more active June contract was at $105.76.
US West Texas Intermediate futures for May fell 98 cents, or 0.95 per cent, to $101.90 a barrel after hitting their highest point since 9 March in early trading.
Analysts said that the fall in prices was a temporary reaction to the idea of the war's end, but any meaningful change in prices would not materialise until flows through the Strait of Hormuz were completely reinstated.
Mr Trump told aides he was willing to end the military campaign against Iran even if the Strait of Hormuz remained largely closed and leave its reopening for a later date, the Wall Street Journal reported on Monday, citing administration officials.
On Monday, Mr Trump warned that the US would "obliterate" Iran's energy plants and oil wells if Tehran did not reopen the waterway.
Iran's closure of the Strait of Hormuz, which typically carries about a fifth of the global oil supply and a quarter of liquefied natural gas, pushed Brent futures up 59 per cent in March, the highest monthly gain ever, while WTI went up 58 per cent this month, the most since May 2020.
"While diplomatic signals remain mixed, the ground reality suggests that uncertainty will persist," said Sugandha Sachdeva, founder of SS WealthStreet, a New Delhi-based research firm.
"Even in the event of de-escalation, restoring damaged infrastructure will take time, keeping supply tight."
Highlighting the threat to seaborne energy supplies, Kuwait Petroleum Corp said on Tuesday its fully loaded crude oil tanker Al Salmi, capable of carrying up to 2 million barrels, was struck by an alleged Iranian projectile at a Dubai port. Officials also warned of potential oil spills in the area.
On Saturday, Yemeni forces targeted Israel with missiles, raising fresh concerns about possible disruptions to the Bab el-Mandeb, the chokepoint linking the Red Sea and the Gulf of Aden, a key route for ships moving between Asia and Europe via the Suez Canal.
Saudi crude exports have been rerouted through this passage, with volumes redirected from the Gulf to the Red Sea port of Yanbu reaching 4.658 million barrels a day last week, according to Kpler data, a sharp rise from an average of 770,000 bpd in January and February.
Meanwhile, in the US, crude oil stockpiles were expected to have fallen last week, along with distillate and gasoline inventories, a preliminary Reuters poll showed on Monday.
"Contradictory statements and signals on the state of the war are flying thick and fast and truth and facts are the biggest casualty," Vandana Hari, founder of oil market analysis provider Vanda Insights, said.
"Crude is likely to continue being whiplashed and directionless."
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