Oil prices fell by more than $2 a barrel on Wednesday as renewed talks between Iran and Oman raised hopes that the Strait of Hormuz could reopen, potentially easing shipping constraints affecting oil supplies from the Middle East.
Brent crude futures fell $2.30, or 2.6 per cent, to $86.28 a barrel by 0447 GMT, after earlier dropping to their lowest level since August 13.
US West Texas Intermediate (WTI) crude futures also declined, falling $2.08, or 2.53 per cent, to $80.29 a barrel after earlier touching their lowest level since August 10.
Both benchmarks fell by more than 3 per cent on Tuesday as markets reacted to developments surrounding the key shipping route.
“The market continues to react to developments surrounding navigation through the Strait of Hormuz, and hopes for progress in talks between Iran and Oman have triggered selling,” said Mitsuru Muraishi, an analyst at Fujitomi Securities.
He added that uncertainty over the outlook had encouraged bargain buying, limiting further losses, and said oil prices were likely to remain range-bound in the near term.
Iran said it had restarted talks with Oman over the management of the Strait of Hormuz as it faces heightened economic pressure from US President Donald Trump.
Iran and Oman have held intermittent discussions for weeks over controlling traffic through the strategic waterway, which handled about one-fifth of global oil and liquefied natural gas shipments before the US-Israeli war against Iran began in February.
The two countries said on Tuesday that they had discussed establishing a “joint temporary navigational corridor” through the strait and agreed to clear the waterway of mines.
However, shipping activity through Hormuz remains significantly below normal levels.
Preliminary data from ship-tracking firm Kpler showed that only five commodity vessels transited the waterway on Tuesday. The vessels included two liquefied petroleum gas tankers, one bitumen tanker and two empty product tankers.
The figure was well below the 10-day average of 15 vessels and remained significantly lower than pre-war traffic levels, highlighting the continued risk to regional energy supplies.
Meanwhile, diplomatic efforts aimed at ending the wider conflict are continuing.
Pakistan and Iran reportedly made “significant progress” in talks focused on the US-Israeli war against Iran and a potential path towards peace, according to Pakistan’s interior minister following a visit to Tehran.
The developments come after Washington expanded sanctions on Monday aimed at cutting off Iran’s economic lifeline.
The United States also threatened to punish countries that continue to conduct business with Tehran, although it said the penalties would not be imposed immediately.
In the United States, the American Petroleum Institute reported that crude oil inventories increased by approximately 4.2 million barrels in the week ended August 21, according to market sources.
The increase was significantly larger than the roughly 600,000-barrel rise expected by analysts polled by Reuters.
Official US inventory data from the Energy Information Administration, the statistical arm of the Department of Energy, are due later on Wednesday.
The latest developments have left oil markets balancing expectations of improved supply through the Strait of Hormuz against continued geopolitical and shipping risks in the Middle East.
