Oil prices edged lower during Thursday's Asian session as Iran reported progress in talks with Oman on a shipping agreement for the Strait of Hormuz, while investors awaited further signs of a broader United States-Iran peace deal.
By 2:45 pm AEST (4:45 am GMT), Brent crude futures had fallen 34 cents, or 0.4%, to US$79.11 a barrel, while U.S. West Texas Intermediate crude futures were down 43 cents, or 0.6%, at US$74.79 a barrel.
ING commodities strategists said in The Commodities Feed that markets remain focused on the prospect of a breakthrough in negotiations.
"ICE Brent continues to trade below $80/bbl as the market pins its hopes on a deal between the U.S. and Iran. It would resume energy flows through the Strait of Hormuz.
"Iran signalled progress toward this goal, announcing that it has reached an agreement with Oman on new shipping arrangements for the strait, with a joint statement on the deal now being prepared.
"Iran has insisted that the agreement must proceed without interference from unnamed third parties - a formulation that, in practice, almost certainly refers to the U.S.
"The real hinge point now becomes the trajectory of U.S.–Iran discussions, because meaningful progress there is essential before disrupted energy flows can realistically resume."
Iran's Foreign Ministry spokesperson Esmaeil Baghaei said on Wednesday that Tehran and Oman had agreed on the geographical coordinates for a shipping route through the Strait of Hormuz, with a joint statement being finalised provided "certain third parties" did not interfere.
A senior Iranian source and two regional officials also told Reuters that a proposed agreement between Iran and Oman would give Tehran control over vessels entering the Gulf through the Strait of Hormuz, representing one of the biggest concessions offered to Iran during negotiations.
There was no immediate response from the United States on the proposal.
Although President Donald Trump has suggested an agreement 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 strategically important energy shipping routes.
On the supply front, the U.S. Energy Information Administration (EIA) reported that commercial crude oil inventories increased by 2.5 million barrels last week as refinery activity eased and imports edged higher.
Analysts had expected a drawdown of around 1.5 million barrels.
At 407.0 million barrels, U.S. commercial crude inventories remain about 6% below the five-year average for this time of year.
