Oil prices fell by around 2% on Wednesday, extending losses from the previous session, amid renewed hopes that the Strait of Hormuz could be reopened after Iran announced the resumption of talks with Oman over the management of the strategic waterway.
Brent crude futures fell $1.78, or 2%, to $86.80 a barrel by 00:27 GMT, while U.S. West Texas Intermediate (WTI) futures dropped $1.49, or 1.8%, to $80.87 a barrel.
Both benchmarks fell by more than 3% on Tuesday.
Mitsuru Morayashi, an analyst at Fujitomi Securities, said the market continued to respond to developments surrounding navigation through the Strait of Hormuz, with hopes of progress in the Iran-Oman talks triggering a wave of selling.
However, he said uncertainty over the outlook had prompted some bargain buying, limiting further losses, and added that prices were likely to remain within a narrow range for the time being.
Iran said it had resumed talks with Oman on managing the strait amid growing economic pressure from U.S. President Donald Trump on Tehran.
Iran and Oman have held intermittent talks for weeks over managing maritime traffic through the waterway, through which one-fifth of global oil and liquefied natural gas shipments passed before the war began in February.
The two countries said Tuesday that they had discussed establishing a “temporary joint navigation corridor” through the strait and agreed to clear it of mines.
U.S. Eases Some Diplomatic Restrictions
Despite continuing tensions, two sources familiar with the matter told Reuters that the United States had decided to begin returning personnel to some of its diplomatic missions in the Middle East that had been evacuated or had their staffing reduced during the conflict with Iran.
The move suggests Washington sees a lower risk of an escalation with Iran in the near term, although some embassies will initially operate below full capacity.
On Monday, the United States expanded sanctions aimed at cutting off Iran’s economic lifeline, threatening countries that continue trading with Tehran, although Washington said the sanctions would not be imposed immediately.
Tanker Hit Near Strait of Hormuz
The United Kingdom’s Maritime Trade Operations agency said an oil tanker was struck by an unidentified projectile on Tuesday and disabled about nine nautical miles (17 kilometers) northeast of Shisah, Oman, near the entrance to the Strait of Hormuz.
U.S. Oil Inventories Rise
In the United States, market sources citing the American Petroleum Institute (API) said crude oil inventories rose by about 4.2 million barrels in the week ending August 21.
Analysts polled by Reuters had expected crude inventories to rise by an average of around 600,000 barrels.
Official data from the U.S. Energy Information Administration (EIA), the statistical arm of the Department of Energy, was due at 14:30 GMT on Wednesday.
Source: Reuters
