Oil prices fell more than $2 a barrel on Wednesday as renewed Iran-Oman talks raised hopes that the Strait of Hormuz could reopen.
The possible reopening could ease shipping restrictions and improve oil supply from the Middle East.
Brent crude futures fell $2.30, or 2.6%, to $86.28 a barrel by 0447 GMT. The benchmark earlier touched its lowest level since August 13.
US West Texas Intermediate crude fell $2.08, or 2.53%, to $80.29. WTI also reached its lowest level since August 10.
Both benchmarks dropped more than 3% on Tuesday.
Iran-Oman talks revive hopes
Iran said it had resumed talks with Oman over managing traffic through the Strait of Hormuz.
The waterway carried about one-fifth of global oil and liquefied natural gas shipments before the conflict began.
Iran and Oman discussed a temporary navigation corridor on Tuesday. They also agreed to clear the waterway of mines.
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However, shipping traffic remains well below normal levels.
Kpler data showed only five commodity vessels crossed the strait on Tuesday. The figure compares with a 10-day average of 15 vessels.
Market remains uncertain
Fujitomi Securities analyst Mitsuru Muraishi said hopes for progress in the talks triggered selling.
However, he noted that uncertainty encouraged some buyers to return to the market. As a result, oil prices could remain within a limited range.
Meanwhile, talks over ending the wider conflict continue.
Pakistan’s interior minister said Pakistan and Iran made significant progress during discussions in Tehran. The talks focused on the conflict and possible steps towards peace.
US sanctions add pressure
Washington expanded sanctions against Iran on Monday. The new measures target Iran’s economic lifelines and could affect countries that continue doing business with Tehran.
However, the United States said it would not impose penalties immediately.
In the US, the American Petroleum Institute reported that crude inventories increased by about 4.2 million barrels in the week ending August 21.
That increase exceeded the roughly 600,000-barrel rise analysts had expected.
The Energy Information Administration is due to release official inventory figures later on Wednesday.
