Oil Prices Fall as Hormuz Talks Continue
Oil prices fell more than $2 a barrel on Wednesday as talks between Iran and Oman raised hopes that shipping could resume more freely through the Strait of Hormuz.
Brent crude futures dropped $2.30, or 2.6%, to $86.28 a barrel by 0447 GMT.
The benchmark had earlier fallen to its lowest level since August 13.
U.S. West Texas Intermediate crude futures also declined.
WTI fell $2.08, or 2.53%, to $80.29 a barrel. It had earlier reached its lowest level since August 10.
Both benchmarks dropped more than 3% on Tuesday.
Hormuz Reopening Could Ease Supply Concerns
Investors are closely watching developments around the Strait of Hormuz.
The waterway handled about one-fifth of global oil and liquefied natural gas shipments before the conflict involving Iran began in February.
Shipping through the strait has fallen sharply since the war disrupted trade in the region.
Iran and Oman have held several rounds of talks about managing traffic through the strategic waterway.
The two countries said Tuesday that they discussed creating a joint temporary navigation corridor.
They also agreed to clear mines from the strait.
The possibility of safer passage has eased some concerns about energy supply disruptions.
Shipping Remains Well Below Normal
Despite the diplomatic efforts, shipping traffic through Hormuz remains limited.
Preliminary data from ship-tracking company Kpler showed that only five commodity vessels crossed 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.
It also remained far below normal traffic levels before the war.
Analysts say uncertainty surrounding the negotiations could keep oil prices volatile.
Mitsuru Muraishi, an analyst at Fujitomi Securities, said hopes for progress between Iran and Oman had encouraged investors to sell oil.
He also noted that bargain buying could limit further declines.
Iran Faces Growing Economic Pressure
The talks come as Iran faces increased pressure from Washington.
The United States expanded sanctions on Monday in an effort to restrict Iran’s economic activity.
Washington also threatened countries that continue doing business with Tehran.
However, the U.S. said it would not immediately impose penalties under the new measures.
Diplomatic efforts to end the wider conflict are also continuing.
Pakistan’s interior minister said Tuesday that Pakistan and Iran had made significant progress during talks focused on the conflict and possible steps toward peace.
US Oil Inventories Add Another Focus
U.S. oil inventories are also attracting attention from traders.
The American Petroleum Institute reported that crude stocks increased by about 4.2 million barrels during the week ending August 21, according to market sources.
That increase was much larger than analysts expected.
A Reuters poll had projected an average increase of about 600,000 barrels.
The official inventory figures from the U.S. Energy Information Administration were due later Wednesday.
Traders will assess those figures alongside developments in the Strait of Hormuz.
For now, hopes of improved shipping through the waterway have pushed oil prices lower, although uncertainty over the conflict and negotiations could continue to cause sharp price swings.
