Oil prices settled lower on Wednesday after a volatile session, as investors monitored talks between Iran and Oman over the Strait of Hormuz and a slight increase in U.S. crude inventories.
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Brent crude futures fell 74 cents, or 0.84%, to $87.84 a barrel at settlement, while U.S. West Texas Intermediate (WTI) crude futures declined 13 cents, or 0.16%, to $82.23 a barrel.
Both benchmarks hit their lowest levels since August 10 during the session, amid hopes that shipping traffic through the Strait of Hormuz could increase.
The two benchmarks pared some losses after official data showed that U.S. crude inventories rose by less than expected last week.
The U.S. Energy Information Administration said crude inventories increased by 95,000 barrels to 428.9 million barrels in the week ended August 21, compared with analysts’ expectations for a 597,000-barrel increase in a Reuters poll.
Analysts said the talks between Iran and Oman had shifted market sentiment.
Ole Hansen, head of commodity research at Saxo Bank, said the market had moved from pricing in a high probability of prolonged disruption and renewed escalation to considering the possibility of a partial reopening, negotiated shipping arrangements and a lower risk of renewed military confrontation.
He added that a credible agreement that quickly restores shipping through the strait could remove another layer of the geopolitical premium from oil prices.
A senior Iranian source said on Wednesday that Iran and Oman were working out details of an agreement concerning the strait, after Iran’s Revolutionary Guards said the two countries had agreed on a mechanism for sharing the waterway and its revenues.
Before the outbreak of the Iran war in late February, the strait carried about one-fifth of global oil and gas supplies.
Preliminary data from ship-tracking company Kpler showed that five cargo vessels passed through the waterway on Tuesday, down from an average of 15 vessels over the previous 10 days and well below pre-war levels.
Talks aimed at ending the conflict comprehensively are continuing. Pakistan’s interior minister said on Tuesday, following a visit to Tehran, that Pakistan and Iran had made “significant progress” in negotiations.
Qatar’s Foreign Ministry spokesman Majed Al Ansari said on Wednesday that Prime Minister Sheikh Mohammed bin Abdulrahman Al Thani would visit Tehran on Thursday and meet Iranian officials to discuss “ways to de-escalate tensions and create conditions conducive to dialogue.”
Meanwhile, the energy supply crisis linked to the Russia-Ukraine war continues, with no indication that it is easing.
Three oil industry sources said Russia’s Norsi refinery, the country’s fourth-largest oil refinery and second-largest gasoline producer, halted crude refining on Wednesday following a Ukrainian drone attack.
Bloomberg reported, citing three sources close to the Kremlin, that Russia is considering intensifying ballistic missile attacks on Kyiv, including targets in the city center, as well as infrastructure in other parts of Ukraine, after concluding that negotiations toward a peace agreement had reached an impasse.
A U.S. senator sponsoring legislation to impose sweeping sanctions on Russia said he hoped the House of Representatives would pass the bill next month, describing it as potentially a “knockout blow” to Russian President Vladimir Putin’s efforts to finance the war in Ukraine.
Reuters
