Oil prices drop as traders look for US-Iran talks progress

LONDON: Oil prices fell around 3% on Wednesday as traders weighed up progress in U.S.-Iran peace talks against renewed hostilities.

Brent crude futures fell $2.67, or 2.68%, to $96.91 a barrel by 1139 GMT, while U.S. West Texas Intermediate (WTI) crude lost $3.43, or 3.65%, to $90.46 a barrel. The losses dented Brent’s gains from Tuesday.

“There has been palpable progress towards ending the crisis, and an increasing number of ships are transiting the critical chokepoint. This is why the downward pressure has resumed,” PVM analyst Tamas Varga said, referring to the Strait of Hormuz, key to global oil and gas flows.

July Brent futures rose 3.6% in the previous session after the U.S. carried out new strikes in Iran, hurting hopes that had risen over the weekend that Washington and Tehran would reach a peace deal.

“Hopes for a framework agreement between the U.S. and Iran to end the conflict have been somewhat dampened by the recent U.S. strikes on Iranian missile sites and vessels that were allegedly attempting to lay mines in the Strait of Hormuz,” Commerzbank analysts said on Wednesday.

“Nevertheless, confidence remains high among market participants,” they added.

Iran said on Tuesday that the U.S. had violated a ceasefire by striking targets near the Strait of Hormuz, while Washington said its strikes were defensive in nature.

Israel ramped up bombing in Lebanon on Tuesday, further straining peace efforts.

After an April ceasefire in the three-month-long conflict, both sides indicated they had made progress in talks toward reopening the Strait.

News that some LNG tankers have passed through the strait in recent days lifted expectations that the waterway might reopen soon, which would add to global supply.