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EMEA Oil Update: Crude Declines as Iran-Oman Hormuz Talks Ease Geopolitical Risk Premium

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Crude futures fell for a third day on Wednesday as diplomatic talks regarding a temporary navigation corridor in the Strait of Hormuz gained traction and eased supply concerns in the global markets.

Brent dropped more than 2% to $86.79 per barrel, while Murban crude futures fell 1.9% at $91.68/bbl.

"Oil prices remain under downward pressure as Iran and Oman talks on the Strait of Hormuz move forward and Pakistan signals some progress in talks with Iran to end the Middle East war," ING analysts said.

The sell-off was primarily catalyzed by easing geopolitical risk premiums as diplomatic efforts in the Middle East showed signs of progress, analysts said.

Iran and Oman have reportedly finalized agreements regarding respective shares of the Strait of Hormuz and associated revenues, according to a Revolutionary Guards spokesperson cited by the Tasnim news agency.

Market analysts noted that positive signals from Persian Gulf talks including progress reported by Pakistani officials following visits to Tehran, and ongoing discussions between Oman and Iran regarding a temporary navigational corridor and mine-clearing framework in the Strait of Hormuz, helped cool immediate supply anxiety.

"However, any agreement between these two parties does not mean we will see normalisation in oil flows through the key chokepoint. We would likely need to see the US lift its blockade on Iranian ports and ease sanctions on Iran before we see any move towards normalization," ING added.

On the supply side, data from the American Petroleum Institute revealed Tuesday that US crude oil inventories increased by 4.2 million barrels in the week ended Aug. 21.

The oil market now awaits the US Energy Information Administration's petroleum inventory report, scheduled for release on Wednesday.

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