Oil edged lower as Strait of Hormuz diplomacy counters modest US inventory build

Global crude oil futures settled lower on Wednesday following a volatile session, extending the week’s retreat as market participants continued to trim geopolitical risk premiums amid advancing diplomatic negotiations over navigational arrangements in the Strait of Hormuz.

International benchmark Brent crude shed 74 cents, or 0.84%, to settle at $87.84 a barrel.

US West Texas Intermediate (WTI) fell 13 cents, or 0.16%, to close at $82.23 a barrel.

Both contracts fell to their lowest intraday levels since 10 August during the session before paring losses. Downside pressure was largely driven by bilateral discussions between Iran and Oman aimed at finalising operational details for a joint shipping corridor and waterway revenue-sharing. The diplomatic engagement encouraged traders to factor in a lower probability of prolonged maritime disruption and military confrontation, unwinding a layer of the regional risk premium.

Physical transits through the chokepoint nevertheless remain constrained, with preliminary vessel-tracking data recording just five commodity carriers passing through the waterway on Tuesday, down from the 10-day average of 15. Broader diplomatic channels also showed movement, supported by progress in Pakistan-Iran discussions and scheduled de-escalation meetings involving Qatari officials in Tehran.

The day’s downward momentum was tempered by supportive US inventory data. Figures from the Energy Information Administration (EIA) revealed commercial crude stockpiles rose by 95,000 barrels to 428.9 million barrels for the week ended 21 August, well below the projected 597,000-barrel build. Downside was further cushioned by supply friction in Eastern Europe after a drone attack suspended crude processing at Russia’s NORSI refinery.

Written by: Aiman Haikal