Oil eases on Middle East diplomacy hopes, Saudi attacks keep supply worries alive

Oil prices dipped on Tuesday as the prospect of a resolution to the US-Israeli war on Iran reduced supply worries, but Brent crude remained near six-month highs due to attacks on Saudi Arabia dampening hopes for immediate stability in the region. Brent crude futures fell 66 cents, or 0.57 per cent, to $115.15 a barrel as of 0000 GMT, while US West Texas Intermediate crude slid 44 cents, or 0.43 per cent, to $101.32.

Saudi Arabia, Turkey, and Pakistan met with Iranian officials in Tehran on Monday, aiming to ease tensions in the Middle East. The four nations agreed to keep discussing ways to strengthen cooperation in peace and security, according to Iranian state media. The talks sought to establish open negotiating channels to prevent a repeat of military escalation.

The potential for a diplomatic breakthrough alleviated some fears of supply disruption, putting downward pressure on oil prices. However, the outlook remained uncertain as the likelihood of lasting peace appeared slim, with renewed strikes by Iran-backed Houthis targeting key oil producer Saudi Arabia. October has seen the worst month for attacks on commercial shipping in the Strait of Hormuz and surrounding waters, as reported by a Washington-based think tank tracking maritime security incidents globally since 2017.

The ongoing conflict has engulfed the Middle East, with the Strait of Hormuz, a narrow waterway responsible for carrying around a fifth of the world's energy supply before the war began in February, becoming the focal point of the turmoil. Prior to the conflict, Brent prices had soared above $117 a barrel, reaching an all-time high since April.