Oil prices extend decline on expectations of smoother crude flows via Hormuz

Oil prices extended their decline, trading near four-month lows, on expectations that more oil tankers stranded in the Gulf since the start of the Iran war will soon move out of the Strait of Hormuz. Brent crude futures and U.S. West Texas Intermediate both slipped on Wednesday, continuing a downward trend from the previous session.

This price pressure comes after Washington granted Iran a 60-day sanctions waiver, allowing it to sell oil, and as hostilities in Lebanon have eased. Analysts suggest that further progress in nuclear negotiations could push prices back to pre-war levels. Oman and Iran have agreed to continue discussions regarding navigation in the Strait, though U.S. officials have warned that any transit fees imposed by Iran would violate international law.

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Crude oil prices were weighed down by hopes of easing U.S.-Iran tensions and a recovery in oil shipments through the Strait of Hormuz.

Despite these developments, uncertainty remains regarding the durability of any accord. Investors are closely watching the ability of Middle Eastern producers to restore exports and the number of ships that will enter the region. Ship-tracking data indicated that three stranded supertankers passed through the strait on Tuesday, and the UN shipping agency is coordinating an evacuation plan for hundreds of stranded vessels.

Meanwhile, crude oil stocks in the U.S. fell by 765,000 barrels in the week ended June 19, according to market sources citing American Petroleum Institute data. However, this figure was significantly lower than the 4.5 million barrels estimated by Reuters poll of nine analysts.

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Further progress in nuclear negotiations could push prices back to pre-war levels.