Oil prices rebound modestly after biggest single-day decline

Oil prices rebounded modestly on Tuesday after posting their biggest single-day decline in weeks in the previous session.

Benchmark oil prices extended their recovery, with Brent crude climbing $0.49, or 0.58%, to $84.26 a barrel, while WTI crude advanced $0.41, or 0.51%, to $80.75 a barrel around 7:20 am IST.

The rebound followed Monday's 7% slide, which had pushed the benchmark to its lowest level in three weeks.

Markets had sold off after US President Donald Trump said that he was pausing any fresh military action against Iran while efforts continued to end the conflict and resolve competing claims over the Strait of Hormuz.

The waterway, a vital route for Gulf oil exports, handled energy shipments equivalent to around one-fifth of global consumption each day before the conflict began disrupting trade.

Even so, prospects of a negotiated outcome remained uncertain after Iran dismissed Trump's remarks.

Iran's foreign ministry spokesman Esmail Baghaei said that no talks with Washington were under way and that no meetings had been arranged, contradicting Trump's assertion that negotiations were in progress.

The future of the Strait of Hormuz also remains a key point of contention.

The United States maintains that a memorandum of understanding agreed in June committed Iran to reopening the passage, while Tehran argues the text explicitly safeguarded its authority over the strait.

Signs of changing shipping patterns have continued to emerge.

Barclays analysts said that crude and refined product exports through the Strait of Hormuz averaged 4.2 million barrels a day in the week ended July 31, compared with 3.2 million barrels a day the week before, Reuters reported.

Shipping data also showed six Saudi-flagged supertankers recently altered their route in the Gulf of Aden and are now sailing towards southern Africa.

At the same time, two vessels carrying Saudi crude crossed the Bab el-Mandeb Strait.

Traffic through the Strait of Hormuz between Iran and Oman has also slowed following reports of attacks on vessels.

Fresh concerns surfaced on Tuesday after the United Kingdom Maritime Trade Operations received a report from a cargo vessel that said it had been struck by an unknown projectile about 20 nautical miles (37 km) northeast of Oman's Al Khasab.

Market participants said the latest developments suggest that risks to energy supplies remain despite the pause in military action.

"Some of the sting has been taken out of oil prices ... with Trump pausing strikes on Iran and touting a return to negotiations (though) the move lower remains fragile -- oil could just as easily rebound higher if missiles start flying again or if tankers around the Strait of Hormuz come under fire once more," Tim Waterer, chief market analyst at KCM Trade told Reuters.

Even though oil prices have continued to climb, they remain below the earlier peak of $126 per barrel reached during the previous surge.