Oil prices fell about 2% on Wednesday. Iran said it resumed talks with Oman on managing the Strait of Hormuz, raising hopes for reopened shipping lanes.

Brent crude dropped to $86.27 a barrel, while US West Texas Intermediate slid to $80.87. Both benchmarks lost more than 3% on Tuesday.

Iran and Oman Discuss Temporary Hormuz Corridor

Iran and Oman have held on-and-off talks for weeks over Strait of Hormuz traffic. The waterway has historically carried about one-fifth of global oil and liquefied natural gas shipments. Volumes fell after fighting broke out in February.

The two countries said Tuesday they discussed a joint temporary navigational corridor. They also agreed to clear the strait of mines. Iran restarted the negotiations as it faces heightened economic pressure from President Donald Trump’s administration.

“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.”

Mitsuru Muraishi, an analyst at Fujitomi Securities, told Reuters.

Washington expanded sanctions targeting Iran on Monday, threatening countries that keep doing business with Tehran. However, penalties will not take effect immediately.

US Sees Lower Risk of Escalation

The US has begun returning personnel to some Middle East diplomatic missions evacuated during the conflict. Two people familiar with the matter said.

The personnel shift therefore suggests Washington sees a lower near-term risk of escalation. Some embassies will initially run below full capacity.

Meanwhile, an unidentified projectile struck and disabled an oil tanker on Tuesday. The incident occurred nine nautical miles northeast of Ash Shishah, near Oman’s entrance to the strait. The United Kingdom Maritime Trade Operations (UKMTO) reported the strike.

Rising US Crude Stocks Add to Selling Pressure

The American Petroleum Institute (API) reported a rise in US crude inventories. Stockpiles increased by about 4.2 million barrels in the week ended August 21, market sources said.

Analysts polled by Reuters had forecast a 600,000 barrel increase. Official data from the Energy Information Administration (EIA) are due Wednesday at 10:30 a.m. ET.

In contrast, Muraishi said uncertainty over the outlook has prompted bargain buying, which could keep prices range-bound in the near term.

Source: BeInCrypto