Oil prices fell for a third day, as Iran and Oman discussed a temporary framework aimed at resuming shipping through the Strait of Hormuz.
Brent crude traded near $86 a barrel, bringing its losses this week to about 9%, while West Texas Intermediate crude traded near $80.
Iranian Foreign Minister Abbas Araqchi and his Omani counterpart Badr Al Busaidi discussed the initiative to establish a temporary joint maritime corridor, according to a statement carried by the Omani News Agency.
Crude oil prices fell this week as diplomatic efforts gained momentum and the risk of renewed military escalation faded, while Washington's latest sanctions on Tehran stopped short of imposing harsher measures on trading partners, including China, the largest buyer of crude from the OPEC member state.
Futures contracts remain more than 40% higher this year, as the US-Iran conflict, which has restricted supplies from the Gulf, approaches its sixth month.
Dennis Kessler, senior vice president of trading at BOK Financial Securities Inc., said: It appears that crude oil is now pricing in a peace agreement closer rather than further away.
He added: As some oil continues to pass through the strait, it is more likely that Iran and the United States are in a newer phase of de-escalation, as both sides look for a way out.
Technical talks between Iran and Oman will continue with the aim of agreeing on a permanent maritime corridor, the future management of the strait, as well as a mechanism for exchanging information, managing traffic, and providing related maritime and security services, according to the Omani News Agency.
Talks on a permanent track and US stockpiles rise
Iran and Oman will hold further talks to negotiate a new permanent shipping route within 30 to 60 days through the vital waterway, the semi-official Tasnim news agency quoted Iranian Deputy Foreign Minister Kazem Gharibabadi as saying.
He said the two sides had agreed on a temporary path, but did not specify when the next phase of talks on a permanent path would begin.
The United States is preparing to return diplomats to embassies in the Middle East from which they were evacuated before and during the war, an indication that Washington does not anticipate a renewed large-scale conflict, according to The New York Times. Meanwhile, the Pakistani army chief concluded a one-day visit to Iran, which Iranian media described as having yielded valuable results.
Separately, the American Petroleum Institute reported that U.S. crude oil inventories rose by 4.2 million barrels last week, according to a document seen by Bloomberg. If official data confirmed later on Wednesday, it would mark the fourth consecutive weekly increase.
Latest price movements
Brent crude for October delivery fell 2.8% to $86.10 a barrel at 11:25 a.m. Singapore time.
West Texas Intermediate crude for October delivery fell 2.7% to $80.14 a barrel.
