Oil eases on Middle East diplomacy hopes

Oil prices dipped on Tuesday as the prospect of a US-Israeli resolution on Iran kept supply concerns in check, but Brent crude remained near six-month highs due to attacks on Saudi Arabia dampening expectations of immediate stability in the region. Brent futures fell 66 cents, or 0.57%, to $115.15 a barrel at 0000 GMT, while US West Texas Intermediate crude slipped 44 cents, or 0.43%, to $101.32.

Saudi Arabia, Turkey and Pakistan convened talks with Iranian officials in Tehran on Monday to ease tensions in the Middle East. The goal was to establish open negotiating channels to prevent a resurgence in military escalation. The three countries agreed to continue discussions aimed at bolstering cooperation in peace and security, according to Iranian state media.

The hope for a resolution in the conflict helped alleviate some fears of supply disruption, which in turn put downward pressure on oil prices and pressured prices lower. However, the prospects for peace appeared fragile, with renewed attacks by Iran-aligned Houthis on crucial producer Saudi Arabia. October has witnessed the worst month for attacks on commercial shipping in the Strait of Hormuz and nearby waters, as per data compiled by a Washington-based think tank tracking maritime security incidents globally since 2017.

The ongoing war has centered the turmoil around the Strait of Hormuz, which accounts for roughly a fifth of global energy supplies before the conflict ignited in February.

Brent prices spiked to over $117 a barrel last week, the highest level since April, following a surge of Iranian attacks on tankers around the strait. Brent prices also hit $117 on Monday. Meanwhile, Russian refiners are increasing diesel production in October after the government granted export quotas in response to the Kremlin's supply agreement with the US, according to two industry sources privy to the matter.