By: Economy Middle East

Oil prices edged lower on Thursday as progress in Iran-Oman talks lifted hopes for a U.S.-Iran peace agreement and the potential reopening of the Strait of Hormuz, while investors remained cautious as they awaited further developments.

As of 5:45 GMT, Brent crude futures fell 47 cents, or 0.59 percent, to $78.98 a barrel, while U.S. West Texas Intermediate crude slipped 56 cents, or 0.74 percent, to $74.66 a barrel. The moves followed a mixed session on Wednesday, when Brent posted a modest gain, and WTI finished slightly lower.

Iran and Oman reach Hormuz understanding

Oil prices came under pressure after Iran and Oman reached an understanding on the geographic coordinates of a shipping route through the Strait of Hormuz, with a joint announcement expected once outstanding issues are resolved, provided there is no interference from third parties, Iranian Foreign Ministry spokesperson Esmaeil Baghaei said on Wednesday.

The development renewed hopes for a lasting resolution to the U.S.-Iran conflict. Oil prices have now returned to levels seen after Washington and Tehran signed an interim peace agreement on June 17, as investors await signs the two sides can secure a permanent deal.

While U.S. President Donald Trump has said a deal to reopen the strait is close, U.S. officials have repeatedly maintained they would not accept Iran controlling access to one of the world’s most critical energy shipping routes.

Threats to global energy supplies persist as U.S. crude inventories rise
Meanwhile, Yemen’s Iran-aligned Houthis said on Wednesday they had launched missile attacks on two Saudi oil tankers, one off the Red Sea port of Yanbu and another in the Gulf of Aden. Saudi authorities have not confirmed either incident.

The reported attacks tempered optimism over a potential easing of shipping disruptions in the Middle East, as concerns persisted that Houthi strikes could continue to threaten vessels transiting the Red Sea.

Further weighing on oil prices, U.S. crude inventories increased last week as refinery activity eased slightly and imports edged higher, according to data released by the U.S. Energy Information Administration on Wednesday. Inventories unexpectedly rose by about 2.5 million barrels last week, defying expectations for a 1.5 million-barrel drawdown and pointing to softer near-term demand. Stocks at the Cushing, Oklahoma, delivery hub also increased, adding further pressure to crude prices.

Meanwhile, geopolitical risks continued to underpin the market. Houthi attacks on shipping in the Red Sea, ongoing disruptions to Russian and Ukrainian maritime trade and interruptions along Kazakhstan’s main oil export route underscored persistent threats to global energy supplies, even as optimism grew over progress toward reopening the Strait of Hormuz.