Oil tumbled below $100 a barrel on Wednesday after US President Donald Trump said he had agreed to a two-week ceasefire with Iran, subject to an immediate and safe reopening of the Strait of Hormuz.
Brent crude futures were down $14.83, or 13.57 per cent, at $94.44 a barrel by 11:02 ET (15:02 GMT). WTI futures slid by $17.92, or 15.87 per cent, to $95.03.
Investors are likely focusing on de-escalation and are selling oil as a result, UBS analyst Giovanni Staunovo said.
Trump's turnaround came shortly before his deadline for Iran to open the Strait of Hormuz or face widespread attacks on its civilian infrastructure. About 20 per cent of the world's daily oil supply passes through the narrow waterway.
"This will be a double sided CEASEFIRE!" Trump wrote on social media after posting earlier on Tuesday that, "a whole civilisation will die tonight," if his demands were not met.
Shipping sources said the Iranian Navy threatened ships attempting to pass through the Strait of Hormuz without Tehran's permission with destruction on Wednesday and that transit through the waterway remained shut.
Iran had said it would halt its attacks if strikes against it stopped and that safe transit through the Strait of Hormuz would be possible for two weeks in coordination with Iranian armed forces, according to a statement by Foreign Minister Abbas Araqchi.
Iran could open the strait in a limited and controlled way on Thursday or Friday ahead of a meeting between US and Iranian officials in Pakistan, a senior Iranian official involved in the talks told Reuters on Wednesday.
"Safe passage for ships in the Strait of Hormuz will be a key point in the talks...oil is set to remain meaningfully above pre-war levels until there is clear evidence of shipping normalisation," said Raymond James analyst Pavel Molchanov.
Shippers were still seeking clarity on the logistics, while refiners inquired about new crude loadings on Wednesday, in response to the ceasefire deal.
Iran attacked Saudi Arabia's East-West Pipeline just hours after the ceasefire was agreed, an industry source told Reuters, hitting its only crude oil export route since hostilities began.
Several Persian Gulf states said early on Wednesday they identified missile launches and drone attacks or issued warnings to civilians to take shelter.
Trump said the US had received a 10-point proposal from Iran, which he called a workable basis to negotiate, and that the parties were a long way towards reaching a definitive agreement for long-term peace. He said on Wednesday that the United States will work closely with Iran and will be talking about tariff and sanctions relief with Tehran.
Oil futures pared losses after US Government data showed a larger-than-expected build in crude stockpiles.
US crude stocks rose by 3.1 million barrels to 464.7 million barrels during the week ended April 3, the Energy Information Administration said on Wednesday. That was higher than the 701,000-barrel build forecast in a Reuters poll.
(Reporting by Nicole Jao in New York, Ahmad Ghaddar and Robert Harvey in London Additional reporting by Helen Clark in Perth and Jeslyn Lerh in Singapore Editing by Kevin Liffey, David Goodman, Janane Venkatraman and Nia Williams)