Oil prices moved lower on Wednesday, extending their decline for a third consecutive session.
Markets became increasingly optimistic that the United States and Iran could reach an interim agreement to restore shipping through the Strait of Hormuz.
Brent and WTI Crude Fall Again
At 02:56 ET, or 06:56 GMT, October Brent crude futures fell 0.5% to $79.00 per barrel.
September West Texas Intermediate futures declined 0.7% to $75.27 per barrel.
Both major oil benchmarks had already dropped by more than 5% on Tuesday, extending the sharp losses recorded on Monday.
U.S.-Iran Deal Hopes Pressure Oil Prices
Reports suggested that the United States, Iran and Oman were moving closer to an interim agreement covering the Strait of Hormuz.
Washington was reportedly hoping to announce a deal as early as Wednesday.
The prospect of restored shipping reduced concerns about a prolonged disruption to global energy supplies.
As a result, traders removed part of the geopolitical risk premium that had previously supported crude oil prices.
Iran Warns That an Agreement Could Be Delayed
Despite improving diplomatic signals, uncertainty remained high.
Iranian media reported that Tehran would delay an agreement to reopen the waterway for as long as U.S. threats continued.
Iran has also publicly denied that formal negotiations with Washington were taking place.
These conflicting statements raised questions about how close the parties were to reaching a final arrangement.
Qatar Drafts an Interim Proposal
Qatar said mediators had prepared an interim proposal as they worked to narrow the differences between Washington and Tehran.
The country has played an important role in efforts to reduce tensions in the Middle East.
U.S. President Donald Trump also discussed de-escalation efforts with Qatar’s Emir Sheikh Tamim bin Hamad Al-Thani during a phone call on Tuesday.
The proposal is intended to restore normal shipping through the Strait of Hormuz.
Why the Strait of Hormuz Matters
The Strait of Hormuz is one of the world’s most important energy transport routes.
Around one-fifth of global oil and liquefied natural gas shipments normally pass through the waterway.
Any prolonged disruption could reduce supply, increase shipping costs and drive energy prices higher.
Therefore, signs that the route could reopen have placed significant downward pressure on crude oil markets.
Trump Says Talks With Iran Have Begun
The latest diplomatic push followed comments from President Trump, who said discussions with Iran had started.
He also suggested that Tehran had a final opportunity to reach an agreement.
However, Iran’s denial of formal talks highlighted the fragile and uncertain nature of the negotiations.
Markets are likely to remain sensitive to any confirmation, delay or breakdown in the diplomatic process.
Security Risks Remain Elevated
Although hopes for a deal have improved, the security situation near the Strait of Hormuz remains unstable.
Another commercial vessel was reportedly attacked close to the waterway on Tuesday.
The incident showed that the risk of further disruption has not disappeared.
Renewed attacks could quickly reverse the recent decline in oil prices by increasing fears about global supply.
U.S. Crude Inventories Rise Unexpectedly
Oil prices also faced pressure from a surprise increase in U.S. crude stockpiles.
The American Petroleum Institute reported that inventories rose by 2.69 million barrels during the week ended July 31.
Analysts had expected stockpiles to fall by approximately 2 million barrels.
The unexpected build suggested that U.S. supply exceeded demand by a wider margin than markets had anticipated.
EIA Inventory Report Comes Into Focus
Traders are now waiting for official inventory data from the U.S. Energy Information Administration.
The EIA report is due later on Wednesday and may confirm whether crude stockpiles increased during the week.
A larger-than-expected build could place additional pressure on oil prices.
However, an unexpected draw could offer some support by pointing to stronger demand or tighter supply.
Oil Market Outlook Depends on Diplomacy and Supply Data
Oil prices remain caught between improving diplomatic hopes and ongoing security risks.
A confirmed agreement to reopen the Strait of Hormuz could reduce fears of a supply disruption and push prices lower.
However, renewed attacks or a collapse in negotiations could restore the geopolitical premium.
U.S. inventory data will also influence short-term market direction as traders assess the balance between domestic supply and demand.
