Oil prices fall as traders hope for diplomatic progress in Middle East

Crude oil prices fell Tuesday as traders hoped for diplomatic progress between the U.S. and Iran, though attacks on tankers and strikes against Saudi Arabia have esclatated recently.

U.S. West Texas Intermediate futures for November were down 0.9% at $102.75 per barrel, pulling back dramatically from a session high of $110.48. The November contract expires on Tuesday. The WTI December contract was down 1% at $97.50 per barrel.

Global benchmark Brent crude futures for December delivery fell 1% to $108.31 per barrel, well off a session high of $111.99.

Developments in the Middle East remain in focus, with attacks on commercial ships transiting the Strait of Hormuz escalating in recent weeks. At least 18 vessels have come under fire over the past two weeks, according to ship tracker Kpler.

Iran's Revolutionary Guard Corps said Tuesday that two "non-compliant" oil tankers had been set ablaze in the strait after hitting mines laid by its naval unit, Iranian state-affiliated news agency Tasnim reported.

Meanwhile, Foreign Ministry Spokesperson Esmaeil Baqaei said at a weekly news conference on Tuesday that Tehran would respond to any American strike "in equal measure, if not more forcefully," according to Tasnim.

U.S. President Donald Trump said earlier this month that American forces will not attack Iran before the midterm elections on Nov. 3.

Tamas Varga, analyst at PVM Oil Associates, told CNBC in an email on Tuesday that front-end WTI strength ahead of the contract expiry is a sign of tightness in the global crude oil market.

"It is a reflection of falling export volumes from the Middle East as tanker attacks and Houthi strikes on Saudi oil infrastructure intensify," he said. "Secondly, the U.S. decision to exempt Russian shadow fleet from sanctions will push freight rates possibly lower, which was a prohibitive factor to increase demand for U.S.-sourced crude."

"With this hurdle removed, at least temporary, U.S. crude oil grades are back in play as replacements of Mideast crude oil," he added. "Thirdly, U.S. commercial oil stocks are expected to have declined last week."