Oil prices fell three per cent on Thursday, bouncing off session lows in volatile trade but staying down about three per cent, keeping Brent below $100 a barrel on hopes that a US-Iran peace deal could bring a gradual reopening of the Strait of Hormuz.
Brent crude futures were down $3.21, or 3.17 per cent, at $98.06 a barrel at 11:21 ET (15:21 GMT). US West Texas Intermediate declined $3.15, or around 3.31 per cent, at $91.93.
Trading was volatile, with both benchmarks trading in a range of up one per cent to down 5.5 per cent from the previous close. Both benchmarks slumped more than seven per cent on Wednesday, hitting two-week lows on optimism over a possible end to the Middle East conflict.
The US and Iran are edging toward a limited, temporary agreement to halt their war, sources and officials said on Thursday, with a draft framework that would stop the fighting but leave the most contentious issues unresolved and centre on a short-term memorandum rather than a comprehensive peace deal.
Analysts also flagged a report from Saudi Arabia's Al Arabiya news channel that said understandings have been reached to ease the US blockade in exchange for a gradual reopening of the Strait of Hormuz, and another by Israel's Channel 12 that said Iran had agreed to transfer its stockpile of 60 per cent enriched uranium to a third country.
Reuters could not immediately verify either report. Skepticism, however, remained over their credibility.
"It remains far from clear that there is any material movement toward reopening the Strait of Hormuz, or if we are instead stuck in a rebranded 'ceasefire with no oil' purgatory for the time being," RBC analyst Helima Croft wrote in a note.
SEB Research analyst Ole Hvalbye said a confirmed deal would probably take Brent back into the $80-$90 price range quickly but a breakdown in talks or a Trump pivot back to strikes, however, would immediately push prices north of $120 a barrel.
While a signed memorandum of understanding might reduce the risk premium in the paper market, it would not have much immediate impact on the high premiums for physical crudes, he said, adding that it would take weeks or months for the market to normalise after an agreement.
On the supply front, Iran appears to have cut back oil production by 400,000 barrels per day and is likely to reduce it further as its storage units fill, US Energy Secretary Chris Wright said in an interview with Fox News on Thursday.
A Chinese-owned oil products tanker was attacked near the Strait of Hormuz on Monday, Chinese media outlet Caixin reported, marking the first time a Chinese oil vessel has been attacked.
Earlier in the week, US Treasury Secretary Scott Bessent urged China to intensify its diplomatic efforts to persuade Iran to open the Strait of Hormuz to international shipping, adding that President Donald Trump and his Chinese counterpart Xi Jinping will discuss the subject when they meet next week.
Fallout from the Iran war was a main topic at the Southeast Asian bloc ASEAN meetings on Thursday, with renewed calls for a united front in the face of serious challenges for its fuel import-dependent economies.
ASEAN leaders will on Friday call for good-faith negotiations between the US and Iran and a halt in hostilities, according to a working draft of a statement seen by Reuters.
(Reporting by Siddharth Cavale in New York, Robert Harvey in London, Yuka Obayashi in Tokyo and Emily Chow in Singapore. Editing by Susan Fenton, Mark Potter and David Gregorio)
