US oil prices tumbled on Tuesday after Secretary of State Mike Pompeo hinted at thawing tensions between the United States and Iran.
Crude plunged as much as 4.2% after Pompeo said at a Cabinet meeting that Iran is ready to negotiate about its missile program. Crude finished the day at $57.62 a barrel, down 3.3%.
The apparent progress between the United States and Iran could ease fears of a military conflict that would sideline supplies near the Strait of Hormuz, the vital oil chokepoint in the Middle East. Attacks on oil tankers have lifted oil prices in recent weeks.
President Donald Trump said “a lot of progress has been made” with Iran.
However, Iran on Tuesday pushed back on the idea that it’s willing to talk about its missile program.
Iran’s missiles are “absolutely and under no condition negotiable with anyone or any country, period,” Iran’s Mission to the United Nations said in a statement.
Cooling tensions could raise the chances that the Trump administration’s will eventually lift its punishing sanctions on Iran. Those sanctions have sidelined hundreds of thousands of barrels of Iranian oil, limiting the amount of supply in the world.
“Any bearish news like this is helping to spur on a strong selloff,” said Matt Smith, director of commodity research at ClipperData, an energy firm.
OPEC has recently attempted to boost oil prices by extending production cuts implemented in tandem with Russia. However, last week the cartel warned of a new supply glut in 2020 caused by weaker demand and record-setting output from the US shale oil boom.
The US Energy Information Administration recently dimmed its view on oil demand due to worries about economic growth.
“There are signs of demand slowing,” Smith said. “The economic backdrop is still kind of weak.”
— CNN’s Kevin Liptak contributed to this report