Crude futures fell in midday trading on Wednesday after Iran said it was nearing a final agreement with Oman on a proposed route for shipping through the Strait of Hormuz, as US government data showed a build in domestic crude inventories.
Front-month West Texas Intermediate crude futures retreated by 1.2% to $74.91 per barrel, while Brent futures were down 0.4% to $79.06/bbl.
US commercial crude oil inventories increased by 2.5 million barrels to 407 mmbbls in the week ended July 31, the Energy Information Administration said in its weekly report on Wednesday. Crude inventories were about 6% below the five-year average for this time of year, the EIA said.
The increase is in line with Macquarie's estimate of a 2.5-mmbbl build for the week ended July 31.
Saxo Bank strategists said that WTI slipped toward $74.50/bbl, taking the two-session decline past 10%, its steepest such drop in weeks.
Fueling bearish sentiment, Iran's Foreign Ministry spokesman Esmaeil Baqaei said Iran and Oman had reached an understanding on the geographic coordinates for a shipping route through the Hormuz, and a joint announcement is being finalized.
Baqaei said talks between Iran and Oman had been underway for the past two months to establish a safe passage mechanism for commercial vessels transiting the strategic waterway.
However, Baqaei said the agreement "cannot in itself be interpreted as meaning the Strait has become safe for passing vessels," noting that the main sources of insecurity remain the US military deployment and its blockade of Iranian ports.
On Tuesday, President Trump said an agreement to reopen and ensure maritime security on the Hormuz is imminent, as he hailed "very good discussions" with Iran.
US Central Command also said the "southern route of the Strait of Hormuz remains free and open" in a post on X, highlighting that it had assisted over 1,000 vessels in transiting the waterway.
ING strategists said if a deal holds and we see oil flows from the Persian Gulf normalize, market attention will quickly turn to the supply and demand balance in Q4 2026 and into 2027.
Curbing the losses, Yemen's Houthis attacked a Saudi oil tanker in the northern Red Sea off the coast of Yanbu on Wednesday, a day after the Gulf state diverted ships away from the Bab el-Mandeb chokepoint to the south of the waterway.
Houthi spokesperson Yahya Saree said that the latest attack brings the total number of targeted Saudi oil tankers to eight since the start of the group's maritime blockade on July 22.
Saree said the Houthis intend to target Saudi tankers in the northern Red Sea to "close all access points and prevent their passage" as it vows to "continue and escalate" its operations.
Traffic through the Middle East energy chokepoints was mixed on Aug. 4, with Kpler data showing a combined 42 confirmed crossings in the Hormuz and Bab el-Mandeb.
Kpler analysts said that for operators, headline traffic volumes remain less important than route transparency, vessel behavior and the risk of further disruption.