LONDON: Oil prices fell more than $2 a barrel on Wednesday as renewed talks between Iran and Oman fueled hopes that the Strait of Hormuz could reopen, potentially easing shipping restrictions and concerns over energy supplies in the Middle East.
Brent crude futures dropped $2.30, or 2.6%, to $86.28 a barrel by 9:47 a.m. Pakistan time. The benchmark had earlier fallen to its lowest level since August 13.
US West Texas Intermediate (WTI) crude futures declined $2.08, or 2.53%, to $80.29 a barrel, after touching their lowest level since August 10.
Both benchmarks had already fallen by more than 3% on Tuesday.
Iran-Oman Talks Weigh on Oil Market
Analysts said the latest developments surrounding navigation through the Strait of Hormuz were driving the decline in oil prices.
Mitsuru Muraishi, an analyst at Fujitomi Securities, said expectations of progress in talks between Iran and Oman had triggered selling in the market. However, uncertainty over the eventual outcome was also encouraging some bargain buying, which could keep oil prices within a relatively narrow range.
Iran said it had resumed talks with Oman on managing navigation through the strategic waterway as Tehran faces increasing economic pressure from the United States.
Iran and Oman have held intermittent discussions for several weeks regarding traffic through the strait. Before the US-Israeli war against Iran began in February, the waterway carried about one-fifth of global oil and liquefied natural gas shipments.
Hormuz Shipping Remains Disrupted
Iran and Oman said on Tuesday that they had discussed establishing a joint temporary navigational corridor through the Strait of Hormuz and agreed to clear the waterway of mines.
Despite the talks, shipping activity through the strait remains significantly below normal levels.
Preliminary data from ship-tracking firm Kpler showed that only five commodity vessels crossed the waterway on Tuesday. The vessels included two liquefied petroleum gas tankers and a bitumen tanker exiting the strait, along with two empty product tankers.
That compares with a 10-day average of 15 commodity vessels and remains well below pre-war traffic levels.
Pakistan-Iran Talks Also Focus on Peace Efforts
Diplomatic efforts to end the broader conflict are continuing.
Pakistan and Iran made “significant progress” during talks focused on the US-Israeli war against Iran and possible pathways toward peace, Pakistan’s interior minister said Tuesday after concluding a visit to Tehran.
The diplomatic developments have added another layer of uncertainty to energy markets, with investors closely monitoring any steps that could restore normal shipping through Hormuz.
US Sanctions and Rising Inventories
Washington also expanded sanctions on Monday aimed at cutting off Iran’s economic lifeline, warning countries that continue doing business with Tehran could face penalties. The United States, however, said the measures would not be imposed immediately.
Meanwhile, US crude inventories reportedly increased by around 4.2 million barrels during the week ended August 21, according to figures from the American Petroleum Institute cited by market sources.
That increase was significantly larger than the roughly 600,000-barrel rise expected by analysts surveyed by Reuters.
Official US Energy Information Administration data were scheduled for release later Wednesday and could provide further direction to oil prices.
For now, traders remain focused on developments involving the Strait of Hormuz, with any progress toward restoring shipping potentially putting further downward pressure on crude prices, while renewed tensions could quickly reverse the trend.