Oil prices were down about three per cent on Wednesday after paring deeper losses earlier in the trading session, as Iran reviewed a US proposal to end the war that has disrupted global energy flows from the Persian Gulf.
Brent futures were down $3.13, or three per cent, to $101.36 a barrel at 13:01 EDT (17:01 GMT), while US West Texas Intermediate crude futures fell $2.28, or 2.5 per cent, to $90.07. Earlier in the session, Brent futures were down by as much as seven per cent.
Iran is still reviewing the US proposal to end the war in the gulf despite its initial negative response, a senior Iranian official told Reuters on Wednesday, indicating that Tehran had so far stopped short of rejecting it outright.
Publicly, Iranian officials poured withering scorn on the prospect of any negotiations with US President Donald Trump's administration.
But an apparent delay in delivering a formal response to Pakistan, which delivered a 15-point proposal on behalf of Washington, appeared to signal that at least some figures in Tehran may be considering it.
"Iran has yet to indicate a positive response to the reported recent talks and until a greater definition is forthcoming regarding major progress, the oil market will remain vulnerable to another price up-spike," analysts at energy advisory firm Ritterbusch and Associates said in a note.
Extreme price swings in recent weeks boosted Brent's historic volatility, based on an actual 30-day close-to-close measurement, to its highest level since April 2022 and WTI's volatility to its highest since June 2020.
The war has all but halted shipments of oil and liquefied natural gas through the Strait of Hormuz, which typically carries about one-fifth of the world's LNG and crude supply. The International Energy Agency has called it the biggest-ever oil supply disruption.
The result is a daily loss of around 20 million barrels of crude, meaning there has been a loss of some 500 million barrels, or five full days of global supply, since the war began on February 28.
India, meanwhile, has bought its first cargo of Iranian liquefied petroleum gas in years after the US temporarily removed sanctions on Tehran's oil and refined fuels, sources said.
Japanese Prime Minister Sanae Takaichi during a meeting on Wednesday asked IEA chief Fatih Birol for an additional coordinated release of oil stockpiles, as Tokyo seeks to shield consumers from higher energy prices.
Despite the expectations of some analysts, the latest data from the US Energy Information Administration on Wednesday showed the US did not start pulling crude out of its Strategic Petroleum Reserve during the week ended March 20.
To offset the Strait of Hormuz disruptions, oil exports from Saudi Arabia's Red Sea Yanbu port rose to nearly four million barrels per day last week, a sharp increase from before the war broke out, shipping data showed.
Russia's Baltic ports of Primorsk and Ust-Luga, major export terminals, suspended crude oil and oil products loadings on Wednesday, two sources told Reuters, after massive Ukrainian drone attacks sparked blazes, with smoke visible from Finland.
At least 40 per cent of Russia's oil export capacity has been halted following Ukrainian drone attacks, a disputed attack on a major pipeline and the seizure of tankers, according to Reuters calculations based on market data.
Two stray Ukrainian military drones entered the airspace of Estonia and Latvia on Wednesday morning via Russia, one of which slammed into a chimney at a local power station while the other crash-landed, the two Baltic countries said.
Elsewhere in Europe, German business morale fell sharply in March, as the Iran war made companies more pessimistic and threatened the long-awaited recovery of Europe's biggest economy.
Germany's finance minister set out sweeping reform plans to boost economic growth. In an effort to avoid future energy price volatility, the European Union is considering ending automatic cancellation of excess carbon permits in its emissions trading system, EU officials told Reuters.
The US EIA said energy firms added 6.9 million barrels of crude into stockpiles during the week ended March 20. That figure was higher than the build of 500,000 barrels forecast by analysts in a Reuters poll and the build of 2.4 million barrels that market sources said the American Petroleum Institute trade group reported on Tuesday.
(Reporting by Scott DiSavino in New York, Seher Dareen in London, Yuka Obayashi in Tokyo and Trixie Yap in Singapore; Editing by Jason Neely, Arun Koyyur and Paul Simao)
