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Oil prices fell sharply in early Asian trading on Wednesday, with both major benchmarks down more than 5 per cent amid growing hopes of a ceasefire that could ease supply disruptions from the Middle East.
Brent, the benchmark for two thirds of the world's oil, was down 5.10 per cent to $99.16 a barrel at 8.35am UAE time, while US West Texas Intermediate, the gauge that tracks US crude, was trading 4.27 per cent lower at $88.41 per barrel.
US President Donald Trump on Tuesday said Iran wanted to make a deal and has agreed not to pursue a nuclear weapon. But while he said the two countries are “currently in negotiations”, Iran has denied being part of any talks.
Mr Trump's comments came amid reports the US has sent a 15-point plan to Iran aimed at ending the conflict.
On Monday, Mr Trump he said he had held “productive conversations” with Tehran, and he postponed military strikes on Iranian power plants and energy infrastructure for five days.
Meanwhile, Iran has sent a letter to the International Maritime Organisation saying that “non-hostile” vessels can pass through the Strait of Hormuz in “co-ordination with Iranian authorities”.
“Oil prices continue to be buffeted by headlines from the region, and after Monday’s sharp fall, they picked up once again yesterday as uncertainty around any peace process returned,” said Daniel Richards, senior economist at Emirates NBD.
The reports of Mr Trump offering Iran a 15-point peace plan proposal have “boosted risk-on sentiment, with a sharp fall in oil prices”, he added.
Oil's drop on Wednesday came after weeks of soaring prices. Crude reached nearly $120 a barrel earlier this month as the US-Israeli war on Iran continues, leading to major disruptions to global energy supplies.
Analysts warned at the time that the destruction of energy infrastructure and continued disruption to supply could keep oil prices elevated.
On Wednesday, Kuwait International Airport suffered a drone attack on a fuel tank, in the latest example of strikes continuing across the region.
Gulf producers have lost $15.1 billion in energy revenue since the war began, with at least $10.7 billion in cargo loads sitting in the Strait of Hormuz and unable to reach their destinations, according to the shipping analytics firm Kpler. The firm estimates Hormuz carries $1.2 billion worth of oil, gas and refined products on a normal day.
