Oil settles 5% lower as investors await updates on U.S.-Iran peace deal talks

LONDON: Oil prices settled 5% lower on Wednesday as investors awaited updates on a framework of a deal ‌between the United States and Iran on ending their conflict and reopening the Strait of Hormuz.

Brent crude futures settled $5.29, or 5.31%, at $94.29 a barrel, while U.S. West Texas Intermediate crude lost $5.21, or 5.55%, to $88.68.

Both benchmarks touched their lowest in a month earlier in the session. The losses ​more than erased Brent’s gains from Tuesday.

U.S. Secretary of State Marco Rubio said there has been some ​progress in negotiations with Iran toward a deal. However, President Donald Trump said the U.S. and Iran ⁠still have issues to resolve in peace talks, while Iran’s Fars News has said unresolved issues remain.

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

Washington also dismissed an ​Iranian state television report of a framework deal to restore shipping through the Strait of Hormuz within a month and to ​lift a U.S. naval blockade on Iranian ships. The U.S. will withdraw military forces from the vicinity of Iran and lift its naval blockade, Iranian state TV said, adding that the management of ship traffic through the Strait of Hormuz will be handled by Iran in cooperation with ​Oman.

“A leader from the Iranian military stated that the possibility of returning to war is low, which has many traders ​believing a peace deal is getting closer … It seems the extremely tight global supplies that had been factored into crude are beginning to ‌lessen,” ⁠said Dennis Kissler, senior vice president of trading at BOK Financial.

Traffic through the Strait of Hormuz also continued with an oil products tanker operated by Chinese shipping group COSCO in the process of crossing the chokepoint on Wednesday, after two crude tankers sailed in the past day, although oil traffic overall was still limited, shipping data showed.

“The increase in shipping activity is reinforcing ​expectations that the critical waterway ​could gradually reopen, potentially restoring ⁠disrupted global energy flows and reducing near-term supply risk premiums,” said Mark Schaefer, a director at brokerage Liquidity Energy.

July Brent futures had risen 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.

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. Iran’s effective closure of the Strait of Hormuz has taken ⁠more ​than 14 million barrels per day of Middle East oil supply offline, according to the ​International Energy Agency.

In a sign of demand weakening, India’s two largest airlines sharply cut planned domestic flights for June and July, sources familiar with the matter ​said.