Crude prices sank more than $2 a barrel on Wednesday, hitting their lowest point in over two weeks, after renewed diplomatic contact between Iran and Oman raised the possibility that the Strait of Hormuz could soon reopen to fuller shipping traffic.
By 1012 GMT, Brent crude had dropped $2.73, or 3.08%, to $85.85 a barrel, while West Texas Intermediate slid $2.21, or 2.68%, to $80.15. Both benchmark prices touched their weakest levels since August 10 during the trading session.
Analysts pointed to the Iran-Oman dialogue as the main driver behind the price slide. Bjarne Schieldrop, chief commodities analyst at SEB Research, said the market’s attention has shifted toward the prospect of an agreement allowing oil and petrochemical shipments to pass through the strait, generating a sense of optimism among traders.
The two neighboring countries have resumed discussions over how to manage the Strait of Hormuz, a critical waterway that has faced a blockade during nearly six months of conflict. Oman’s foreign minister expressed hope that a temporary shipping corridor through the strait could be announced in the near future.
The nations have engaged in sporadic talks for weeks concerning oversight of the passage, which handled roughly one-fifth of the world’s oil and liquefied natural gas shipments before the U.S.-Israeli conflict with Iran erupted in February.
On Tuesday, officials from both sides confirmed they had discussed establishing a joint temporary navigational corridor and had agreed to work on demining the strait.
Ole Hansen, head of commodity strategy at Saxo Bank, noted that market sentiment has shifted away from expectations of prolonged disruption and escalation, moving instead toward pricing in a partial reopening and negotiated shipping terms, along with reduced odds of renewed military conflict. He added that a credible deal enabling a quick restoration of traffic through Hormuz could strip away another portion of the geopolitical risk premium built into prices.
Despite the ongoing negotiations, vessel traffic through the strait remains limited. Ship-tracking firm Kpler reported that only five commodity vessels passed through Hormuz on Tuesday — well below the 10-day average of 15 and far under pre-conflict levels.
Separately, shipping data released Wednesday showed two supertankers loaded with a combined 4 million barrels of Saudi crude are now headed to China, having taken on the cargo via ship-to-ship transfers near Oman.
Broader efforts to resolve the conflict are also advancing. Pakistan’s interior minister said Tuesday that talks in Tehran covering the U.S.-Israeli war and potential paths to peace had yielded “significant progress.”
Meanwhile, the United States on Monday broadened sanctions targeting Iran’s economy, warning that countries continuing business dealings with Tehran could face penalties, although it stopped short of enforcing those measures immediately.(Reuters)
